Correlation Between GM and Hanover Foods
Can any of the company-specific risk be diversified away by investing in both GM and Hanover Foods 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 Hanover Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Hanover Foods, you can compare the effects of market volatilities on GM and Hanover Foods 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 Hanover Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hanover Foods.
Diversification Opportunities for GM and Hanover Foods
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Hanover is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hanover Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Foods 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 Hanover Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Foods has no effect on the direction of GM i.e., GM and Hanover Foods go up and down completely randomly.
Pair Corralation between GM and Hanover Foods
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.78 times more return on investment than Hanover Foods. However, GM is 2.78 times more volatile than Hanover Foods. It trades about 0.11 of its potential returns per unit of risk. Hanover Foods is currently generating about -0.01 per unit of risk. If you would invest 3,331 in General Motors on September 4, 2024 and sell it today you would earn a total of 2,173 from holding General Motors or generate 65.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.33% |
| Values | Daily Returns |
General Motors vs. Hanover Foods
Performance |
| Timeline |
| General Motors |
| Hanover Foods |
GM and Hanover Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Hanover Foods
The main advantage of trading using opposite GM and Hanover Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Hanover Foods 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 Hanover Foods will offset losses from the drop in Hanover Foods' long position.The idea behind General Motors and Hanover Foods 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.| Hanover Foods vs. Arrow Financial | Hanover Foods vs. Siriuspoint | Hanover Foods vs. LithiumBank Resources Corp | Hanover Foods vs. Academy Sports Outdoors |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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