Correlation Between GM and Grand Prix
Can any of the company-specific risk be diversified away by investing in both GM and Grand Prix 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 Grand Prix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Grand Prix International, you can compare the effects of market volatilities on GM and Grand Prix 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 Grand Prix. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Grand Prix.
Diversification Opportunities for GM and Grand Prix
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Grand is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Grand Prix International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Prix International 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 Grand Prix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Prix International has no effect on the direction of GM i.e., GM and Grand Prix go up and down completely randomly.
Pair Corralation between GM and Grand Prix
Allowing for the 90-day total investment horizon GM is expected to generate 28.29 times less return on investment than Grand Prix. But when comparing it to its historical volatility, General Motors is 22.53 times less risky than Grand Prix. It trades about 0.03 of its potential returns per unit of risk. Grand Prix International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 156.00 in Grand Prix International on November 28, 2024 and sell it today you would earn a total of 17.00 from holding Grand Prix International or generate 10.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.36% |
| Values | Daily Returns |
General Motors vs. Grand Prix International
Performance |
| Timeline |
| General Motors |
| Grand Prix International |
GM and Grand Prix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Grand Prix
The main advantage of trading using opposite GM and Grand Prix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Grand Prix 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 Grand Prix will offset losses from the drop in Grand Prix's long position.The idea behind General Motors and Grand Prix International 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.| Grand Prix vs. Interlink Communication Public | Grand Prix vs. Aqua Public | Grand Prix vs. BEC World Public | Grand Prix vs. Grande Asset Hotels |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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