Correlation Between GM and WINMARK
Can any of the company-specific risk be diversified away by investing in both GM and WINMARK at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and WINMARK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and WINMARK, you can compare the effects of market volatilities on GM and WINMARK and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of WINMARK. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and WINMARK.
Diversification Opportunities for GM and WINMARK
Very poor diversification
The 3 months correlation between GM and WINMARK is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and WINMARK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WINMARK and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with WINMARK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WINMARK has no effect on the direction of GM i.e., GM and WINMARK go up and down completely randomly.
Pair Corralation between GM and WINMARK
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.05 times more return on investment than WINMARK. However, GM is 1.05 times more volatile than WINMARK. It trades about 0.11 of its potential returns per unit of risk. WINMARK is currently generating about 0.0 per unit of risk. If you would invest 3,331 in General Motors on September 4, 2024 and sell it today you would earn a total of 2,035 from holding General Motors or generate 61.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.41% |
| Values | Daily Returns |
General Motors vs. WINMARK
Performance |
| Timeline |
| General Motors |
| WINMARK |
GM and WINMARK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and WINMARK
The main advantage of trading using opposite GM and WINMARK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, WINMARK can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WINMARK will offset losses from the drop in WINMARK's long position.The idea behind General Motors and WINMARK pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| WINMARK vs. SALESFORCE INC CDR | WINMARK vs. AOI Electronics Co | WINMARK vs. STORE ELECTRONIC | WINMARK vs. GungHo Online Entertainment |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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