Correlation Between GM and GIACONDA FPO
Can any of the company-specific risk be diversified away by investing in both GM and GIACONDA FPO 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 GIACONDA FPO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and GIACONDA FPO, you can compare the effects of market volatilities on GM and GIACONDA FPO 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 GIACONDA FPO. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and GIACONDA FPO.
Diversification Opportunities for GM and GIACONDA FPO
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and GIACONDA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and GIACONDA FPO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GIACONDA FPO 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 GIACONDA FPO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GIACONDA FPO has no effect on the direction of GM i.e., GM and GIACONDA FPO go up and down completely randomly.
Pair Corralation between GM and GIACONDA FPO
Allowing for the 90-day total investment horizon General Motors is expected to generate 5.92 times more return on investment than GIACONDA FPO. However, GM is 5.92 times more volatile than GIACONDA FPO. It trades about 0.05 of its potential returns per unit of risk. GIACONDA FPO is currently generating about 0.09 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,754 from holding General Motors or generate 46.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 30.91% |
| Values | Daily Returns |
General Motors vs. GIACONDA FPO
Performance |
| Timeline |
| General Motors |
| GIACONDA FPO |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and GIACONDA FPO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and GIACONDA FPO
The main advantage of trading using opposite GM and GIACONDA FPO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, GIACONDA FPO 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 GIACONDA FPO will offset losses from the drop in GIACONDA FPO's long position.The idea behind General Motors and GIACONDA FPO 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.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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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