Correlation Between GM and Power Global
Can any of the company-specific risk be diversified away by investing in both GM and Power Global 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 Power Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Power Global Tactical, you can compare the effects of market volatilities on GM and Power Global 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 Power Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Power Global.
Diversification Opportunities for GM and Power Global
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Power is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Power Global Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Global Tactical 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 Power Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Global Tactical has no effect on the direction of GM i.e., GM and Power Global go up and down completely randomly.
Pair Corralation between GM and Power Global
Allowing for the 90-day total investment horizon General Motors is expected to generate 4.05 times more return on investment than Power Global. However, GM is 4.05 times more volatile than Power Global Tactical. It trades about 0.05 of its potential returns per unit of risk. Power Global Tactical is currently generating about 0.09 per unit of risk. If you would invest 3,765 in General Motors on September 4, 2024 and sell it today you would earn a total of 1,739 from holding General Motors or generate 46.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Power Global Tactical
Performance |
| Timeline |
| General Motors |
| Power Global Tactical |
GM and Power Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Power Global
The main advantage of trading using opposite GM and Power Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Power Global 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 Power Global will offset losses from the drop in Power Global's long position.The idea behind General Motors and Power Global Tactical 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.| Power Global vs. Power Floating Rate | Power Global vs. Power Floating Rate | Power Global vs. Prudential Jennison International | Power Global vs. Fidelity New Markets |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |