Correlation Between GM and Power Assets
Can any of the company-specific risk be diversified away by investing in both GM and Power Assets 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 Power Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Power Assets Holdings, you can compare the effects of market volatilities on GM and Power Assets 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 Power Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Power Assets.
Diversification Opportunities for GM and Power Assets
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Power is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings 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 Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of GM i.e., GM and Power Assets go up and down completely randomly.
Pair Corralation between GM and Power Assets
Allowing for the 90-day total investment horizon GM is expected to generate 3.73 times less return on investment than Power Assets. But when comparing it to its historical volatility, General Motors is 1.77 times less risky than Power Assets. It trades about 0.05 of its potential returns per unit of risk. Power Assets Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 146.00 in Power Assets Holdings on October 7, 2024 and sell it today you would earn a total of 514.00 from holding Power Assets Holdings or generate 352.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
General Motors vs. Power Assets Holdings
Performance |
| Timeline |
| General Motors |
| Power Assets Holdings |
GM and Power Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Power Assets
The main advantage of trading using opposite GM and Power Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Power Assets 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 Power Assets will offset losses from the drop in Power Assets' long position.The idea behind General Motors and Power Assets Holdings 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.| Power Assets vs. TEXAS ROADHOUSE | Power Assets vs. INVITATION HOMES DL | Power Assets vs. DFS Furniture PLC | Power Assets vs. alstria office REIT AG |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |