Correlation Between GM and Gouverneur Bancorp
Can any of the company-specific risk be diversified away by investing in both GM and Gouverneur Bancorp 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 Gouverneur Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Gouverneur Bancorp, you can compare the effects of market volatilities on GM and Gouverneur Bancorp 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 Gouverneur Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Gouverneur Bancorp.
Diversification Opportunities for GM and Gouverneur Bancorp
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Gouverneur is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Gouverneur Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gouverneur Bancorp 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 Gouverneur Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gouverneur Bancorp has no effect on the direction of GM i.e., GM and Gouverneur Bancorp go up and down completely randomly.
Pair Corralation between GM and Gouverneur Bancorp
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.99 times more return on investment than Gouverneur Bancorp. However, GM is 2.99 times more volatile than Gouverneur Bancorp. It trades about 0.17 of its potential returns per unit of risk. Gouverneur Bancorp is currently generating about 0.45 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Gouverneur Bancorp
Performance |
| Timeline |
| General Motors |
| Gouverneur Bancorp |
GM and Gouverneur Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Gouverneur Bancorp
The main advantage of trading using opposite GM and Gouverneur Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Gouverneur Bancorp 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 Gouverneur Bancorp will offset losses from the drop in Gouverneur Bancorp's long position.The idea behind General Motors and Gouverneur Bancorp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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