Correlation Between GM and Hennessy Cornerstone
Can any of the company-specific risk be diversified away by investing in both GM and Hennessy Cornerstone 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 Hennessy Cornerstone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Hennessy Nerstone Value, you can compare the effects of market volatilities on GM and Hennessy Cornerstone 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 Hennessy Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hennessy Cornerstone.
Diversification Opportunities for GM and Hennessy Cornerstone
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Hennessy is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hennessy Nerstone Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Value 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 Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Value has no effect on the direction of GM i.e., GM and Hennessy Cornerstone go up and down completely randomly.
Pair Corralation between GM and Hennessy Cornerstone
Allowing for the 90-day total investment horizon General Motors is expected to generate 4.89 times more return on investment than Hennessy Cornerstone. However, GM is 4.89 times more volatile than Hennessy Nerstone Value. It trades about 0.12 of its potential returns per unit of risk. Hennessy Nerstone Value is currently generating about 0.25 per unit of risk. If you would invest 5,197 in General Motors on August 31, 2024 and sell it today you would earn a total of 362.00 from holding General Motors or generate 6.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Hennessy Nerstone Value
Performance |
| Timeline |
| General Motors |
| Hennessy Nerstone Value |
GM and Hennessy Cornerstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Hennessy Cornerstone
The main advantage of trading using opposite GM and Hennessy Cornerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Hennessy Cornerstone 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 Hennessy Cornerstone will offset losses from the drop in Hennessy Cornerstone's long position.The idea behind General Motors and Hennessy Nerstone Value 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.| Hennessy Cornerstone vs. Jhancock Real Estate | Hennessy Cornerstone vs. Fidelity Real Estate | Hennessy Cornerstone vs. Tiaa Cref Real Estate | Hennessy Cornerstone vs. Forum Real Estate |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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