Correlation Between GM and Hour Loop

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Can any of the company-specific risk be diversified away by investing in both GM and Hour Loop 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 Hour Loop into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Hour Loop, you can compare the effects of market volatilities on GM and Hour Loop 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 Hour Loop. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hour Loop.

Diversification Opportunities for GM and Hour Loop

GMHourDiversified AwayGMHourDiversified Away100%
-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between GM and Hour is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hour Loop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hour Loop 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 Hour Loop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hour Loop has no effect on the direction of GM i.e., GM and Hour Loop go up and down completely randomly.

Pair Corralation between GM and Hour Loop

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Hour Loop. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.34 times less risky than Hour Loop. The stock trades about -0.3 of its potential returns per unit of risk. The Hour Loop is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  205.00  in Hour Loop on November 25, 2024 and sell it today you would lose (13.00) from holding Hour Loop or give up 6.34% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Hour Loop

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 050100150
JavaScript chart by amCharts 3.21.15GM HOUR
       Timeline  
General Motors 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb464850525456586062
Hour Loop 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Hour Loop are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hour Loop reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb23456

GM and Hour Loop Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.07-3.05-2.02-1.0-0.0150.891.792.673.574.47 0.010.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15GM HOUR
       Returns  

Pair Trading with GM and Hour Loop

The main advantage of trading using opposite GM and Hour Loop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Hour Loop 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 Hour Loop will offset losses from the drop in Hour Loop's long position.
The idea behind General Motors and Hour Loop 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.
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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