Correlation Between GM and Gateway Real
Can any of the company-specific risk be diversified away by investing in both GM and Gateway Real 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 Gateway Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Gateway Real Estate, you can compare the effects of market volatilities on GM and Gateway Real 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 Gateway Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Gateway Real.
Diversification Opportunities for GM and Gateway Real
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Gateway is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Gateway Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gateway Real Estate 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 Gateway Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gateway Real Estate has no effect on the direction of GM i.e., GM and Gateway Real go up and down completely randomly.
Pair Corralation between GM and Gateway Real
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.22 times more return on investment than Gateway Real. However, General Motors is 4.46 times less risky than Gateway Real. It trades about 0.05 of its potential returns per unit of risk. Gateway Real Estate is currently generating about -0.01 per unit of risk. If you would invest 3,312 in General Motors on September 24, 2024 and sell it today you would earn a total of 1,869 from holding General Motors or generate 56.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.42% |
| Values | Daily Returns |
General Motors vs. Gateway Real Estate
Performance |
| Timeline |
| General Motors |
| Gateway Real Estate |
GM and Gateway Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Gateway Real
The main advantage of trading using opposite GM and Gateway Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Gateway Real 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 Gateway Real will offset losses from the drop in Gateway Real's long position.The idea behind General Motors and Gateway Real Estate 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.| Gateway Real vs. Deutsche Wohnen SE | Gateway Real vs. TIMES CHINA HLDGS | Gateway Real vs. LANDSEA HOMES P | Gateway Real vs. Greenland Hong Kong |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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