Correlation Between GM and Horizon Active
Can any of the company-specific risk be diversified away by investing in both GM and Horizon Active 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 Horizon Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Horizon Active Dividend, you can compare the effects of market volatilities on GM and Horizon Active 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 Horizon Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Horizon Active.
Diversification Opportunities for GM and Horizon Active
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Horizon is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Horizon Active Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Active Dividend 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 Horizon Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Active Dividend has no effect on the direction of GM i.e., GM and Horizon Active go up and down completely randomly.
Pair Corralation between GM and Horizon Active
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.2 times more return on investment than Horizon Active. However, GM is 3.2 times more volatile than Horizon Active Dividend. It trades about 0.06 of its potential returns per unit of risk. Horizon Active Dividend is currently generating about 0.09 per unit of risk. If you would invest 3,525 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,034 from holding General Motors or generate 57.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
General Motors vs. Horizon Active Dividend
Performance |
| Timeline |
| General Motors |
| Horizon Active Dividend |
GM and Horizon Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Horizon Active
The main advantage of trading using opposite GM and Horizon Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Horizon Active 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 Horizon Active will offset losses from the drop in Horizon Active's long position.The idea behind General Motors and Horizon Active Dividend 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.| Horizon Active vs. Horizon Defensive Equity | Horizon Active vs. Horizon Active Asset | Horizon Active vs. Horizon Active Asset | Horizon Active vs. Horizon Defensive Smmd |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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