Correlation Between GM and Heartland Express
Can any of the company-specific risk be diversified away by investing in both GM and Heartland Express 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 Heartland Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Heartland Express, you can compare the effects of market volatilities on GM and Heartland Express 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 Heartland Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Heartland Express.
Diversification Opportunities for GM and Heartland Express
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Heartland is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Heartland Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Express 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 Heartland Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Express has no effect on the direction of GM i.e., GM and Heartland Express go up and down completely randomly.
Pair Corralation between GM and Heartland Express
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.84 times more return on investment than Heartland Express. However, General Motors is 1.19 times less risky than Heartland Express. It trades about 0.25 of its potential returns per unit of risk. Heartland Express is currently generating about 0.19 per unit of risk. If you would invest 5,272 in General Motors on August 25, 2024 and sell it today you would earn a total of 581.00 from holding General Motors or generate 11.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Heartland Express
Performance |
| Timeline |
| General Motors |
| Heartland Express |
GM and Heartland Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Heartland Express
The main advantage of trading using opposite GM and Heartland Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Heartland Express 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 Heartland Express will offset losses from the drop in Heartland Express' long position.The idea behind General Motors and Heartland Express 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.| Heartland Express vs. Fukuyama Transporting Co | Heartland Express vs. Superior Plus Corp | Heartland Express vs. NMI Holdings | Heartland Express vs. Origin Agritech |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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