Correlation Between GM and Goliath Film
Can any of the company-specific risk be diversified away by investing in both GM and Goliath Film 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 Goliath Film into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Goliath Film and, you can compare the effects of market volatilities on GM and Goliath Film 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 Goliath Film. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Goliath Film.
Diversification Opportunities for GM and Goliath Film
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Goliath is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Goliath Film and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goliath Film 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 Goliath Film. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goliath Film has no effect on the direction of GM i.e., GM and Goliath Film go up and down completely randomly.
Pair Corralation between GM and Goliath Film
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.33 times more return on investment than Goliath Film. However, General Motors is 3.01 times less risky than Goliath Film. It trades about 0.08 of its potential returns per unit of risk. Goliath Film and is currently generating about 0.01 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. Goliath Film and
Performance |
| Timeline |
| General Motors |
| Goliath Film |
GM and Goliath Film Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Goliath Film
The main advantage of trading using opposite GM and Goliath Film positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Goliath Film 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 Goliath Film will offset losses from the drop in Goliath Film's long position.The idea behind General Motors and Goliath Film and 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.| Goliath Film vs. HUMANA INC | Goliath Film vs. Aquagold International | Goliath Film vs. Barloworld Ltd ADR | Goliath Film vs. Thrivent High Yield |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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