Correlation Between GM and Graham Holdings
Can any of the company-specific risk be diversified away by investing in both GM and Graham Holdings 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 Graham Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Graham Holdings Co, you can compare the effects of market volatilities on GM and Graham Holdings 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 Graham Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Graham Holdings.
Diversification Opportunities for GM and Graham Holdings
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Graham is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Graham Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graham Holdings 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 Graham Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graham Holdings has no effect on the direction of GM i.e., GM and Graham Holdings go up and down completely randomly.
Pair Corralation between GM and Graham Holdings
Allowing for the 90-day total investment horizon GM is expected to generate 1.57 times less return on investment than Graham Holdings. But when comparing it to its historical volatility, General Motors is 1.06 times less risky than Graham Holdings. It trades about 0.12 of its potential returns per unit of risk. Graham Holdings Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 84,143 in Graham Holdings Co on August 31, 2024 and sell it today you would earn a total of 9,515 from holding Graham Holdings Co or generate 11.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Graham Holdings Co
Performance |
| Timeline |
| General Motors |
| Graham Holdings |
GM and Graham Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Graham Holdings
The main advantage of trading using opposite GM and Graham Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Graham Holdings 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 Graham Holdings will offset losses from the drop in Graham Holdings' long position.The idea behind General Motors and Graham Holdings Co 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.| Graham Holdings vs. Cable One | Graham Holdings vs. Adtalem Global Education | Graham Holdings vs. Axalta Coating Systems | Graham Holdings vs. Madison Square Garden |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |