Correlation Between GM and Hammond Power
Can any of the company-specific risk be diversified away by investing in both GM and Hammond Power 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 Hammond Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Hammond Power Solutions, you can compare the effects of market volatilities on GM and Hammond Power 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 Hammond Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hammond Power.
Diversification Opportunities for GM and Hammond Power
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Hammond is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hammond Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammond Power Solutions 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 Hammond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammond Power Solutions has no effect on the direction of GM i.e., GM and Hammond Power go up and down completely randomly.
Pair Corralation between GM and Hammond Power
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.83 times more return on investment than Hammond Power. However, General Motors is 1.2 times less risky than Hammond Power. It trades about -0.06 of its potential returns per unit of risk. Hammond Power Solutions is currently generating about -0.21 per unit of risk. If you would invest 5,177 in General Motors on November 4, 2024 and sell it today you would lose (231.00) from holding General Motors or give up 4.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
General Motors vs. Hammond Power Solutions
Performance |
| Timeline |
| General Motors |
| Hammond Power Solutions |
GM and Hammond Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Hammond Power
The main advantage of trading using opposite GM and Hammond Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Hammond Power 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 Hammond Power will offset losses from the drop in Hammond Power's long position.The idea behind General Motors and Hammond Power Solutions 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.| Hammond Power vs. Hammond Manufacturing | Hammond Power vs. Firan Technology Group | Hammond Power vs. Supremex | Hammond Power vs. Geodrill Limited |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |