Correlation Between GM and GSE Systems
Can any of the company-specific risk be diversified away by investing in both GM and GSE Systems 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 GSE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and GSE Systems, you can compare the effects of market volatilities on GM and GSE Systems 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 GSE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and GSE Systems.
Diversification Opportunities for GM and GSE Systems
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and GSE is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and GSE Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSE Systems 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 GSE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSE Systems has no effect on the direction of GM i.e., GM and GSE Systems go up and down completely randomly.
Pair Corralation between GM and GSE Systems
Allowing for the 90-day total investment horizon General Motors is expected to generate 18.19 times more return on investment than GSE Systems. However, GM is 18.19 times more volatile than GSE Systems. It trades about 0.07 of its potential returns per unit of risk. GSE Systems is currently generating about 0.0 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 21.74% |
| Values | Daily Returns |
General Motors vs. GSE Systems
Performance |
| Timeline |
| General Motors |
| GSE Systems |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
GM and GSE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and GSE Systems
The main advantage of trading using opposite GM and GSE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, GSE Systems 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 GSE Systems will offset losses from the drop in GSE Systems' long position.The idea behind General Motors and GSE Systems 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.| GSE Systems vs. LifeSpeak | GSE Systems vs. RenoWorks Software | GSE Systems vs. 01 Communique Laboratory | GSE Systems vs. RESAAS Services |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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