Correlation Between GM and Helio
Can any of the company-specific risk be diversified away by investing in both GM and Helio 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 Helio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Helio, you can compare the effects of market volatilities on GM and Helio 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 Helio. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Helio.
Diversification Opportunities for GM and Helio
Excellent diversification
The 3 months correlation between GM and Helio is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Helio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helio 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 Helio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helio has no effect on the direction of GM i.e., GM and Helio go up and down completely randomly.
Pair Corralation between GM and Helio
Allowing for the 90-day total investment horizon GM is expected to generate 10.79 times less return on investment than Helio. But when comparing it to its historical volatility, General Motors is 7.61 times less risky than Helio. It trades about 0.06 of its potential returns per unit of risk. Helio is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 100.00 in Helio on September 16, 2024 and sell it today you would earn a total of 350.00 from holding Helio or generate 350.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 58.47% |
| Values | Daily Returns |
General Motors vs. Helio
Performance |
| Timeline |
| General Motors |
| Helio |
GM and Helio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Helio
The main advantage of trading using opposite GM and Helio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Helio 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 Helio will offset losses from the drop in Helio's long position.The idea behind General Motors and Helio 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.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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