Correlation Between GM and Nationwide Mid
Can any of the company-specific risk be diversified away by investing in both GM and Nationwide Mid 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 Nationwide Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nationwide Mid Cap, you can compare the effects of market volatilities on GM and Nationwide Mid 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 Nationwide Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nationwide Mid.
Diversification Opportunities for GM and Nationwide Mid
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Nationwide is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nationwide Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Mid Cap 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 Nationwide Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Mid Cap has no effect on the direction of GM i.e., GM and Nationwide Mid go up and down completely randomly.
Pair Corralation between GM and Nationwide Mid
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.41 times more return on investment than Nationwide Mid. However, GM is 2.41 times more volatile than Nationwide Mid Cap. It trades about 0.17 of its potential returns per unit of risk. Nationwide Mid Cap is currently generating about 0.33 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Nationwide Mid Cap
Performance |
| Timeline |
| General Motors |
| Nationwide Mid Cap |
GM and Nationwide Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nationwide Mid
The main advantage of trading using opposite GM and Nationwide Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nationwide Mid 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 Nationwide Mid will offset losses from the drop in Nationwide Mid's long position.The idea behind General Motors and Nationwide Mid Cap 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.| Nationwide Mid vs. Federated Mid Cap Index | Nationwide Mid vs. Nationwide Mid Cap | Nationwide Mid vs. Dreyfus Midcap Index | Nationwide Mid vs. Nationwide Sp 500 |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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