Correlation Between GM and Great Wes
Can any of the company-specific risk be diversified away by investing in both GM and Great Wes 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 Great Wes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Great Wes 515, you can compare the effects of market volatilities on GM and Great Wes 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 Great Wes. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Great Wes.
Diversification Opportunities for GM and Great Wes
Pay attention - limited upside
The 3 months correlation between GM and Great is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Great Wes 515 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wes 515 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 Great Wes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wes 515 has no effect on the direction of GM i.e., GM and Great Wes go up and down completely randomly.
Pair Corralation between GM and Great Wes
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.1 times more return on investment than Great Wes. However, GM is 3.1 times more volatile than Great Wes 515. It trades about 0.11 of its potential returns per unit of risk. Great Wes 515 is currently generating about 0.11 per unit of risk. If you would invest 3,212 in General Motors on August 25, 2024 and sell it today you would earn a total of 2,641 from holding General Motors or generate 82.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.66% |
| Values | Daily Returns |
General Motors vs. Great Wes 515
Performance |
| Timeline |
| General Motors |
| Great Wes 515 |
GM and Great Wes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Great Wes
The main advantage of trading using opposite GM and Great Wes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Great Wes 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 Great Wes will offset losses from the drop in Great Wes' long position.The idea behind General Motors and Great Wes 515 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.| Great Wes vs. National Bank of | Great Wes vs. Laurentian Bank | Great Wes vs. iA Financial | Great Wes vs. Bird Construction |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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