Correlation Between GM and HQ Global
Can any of the company-specific risk be diversified away by investing in both GM and HQ Global 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 HQ Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and HQ Global Education, you can compare the effects of market volatilities on GM and HQ Global 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 HQ Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and HQ Global.
Diversification Opportunities for GM and HQ Global
Excellent diversification
The 3 months correlation between GM and HQGE is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and HQ Global Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HQ Global Education 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 HQ Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HQ Global Education has no effect on the direction of GM i.e., GM and HQ Global go up and down completely randomly.
Pair Corralation between GM and HQ Global
Allowing for the 90-day total investment horizon GM is expected to generate 62.7 times less return on investment than HQ Global. But when comparing it to its historical volatility, General Motors is 27.23 times less risky than HQ Global. It trades about 0.05 of its potential returns per unit of risk. HQ Global Education is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 0.01 in HQ Global Education on September 2, 2024 and sell it today you would earn a total of 0.00 from holding HQ Global Education or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. HQ Global Education
Performance |
| Timeline |
| General Motors |
| HQ Global Education |
GM and HQ Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and HQ Global
The main advantage of trading using opposite GM and HQ Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, HQ Global 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 HQ Global will offset losses from the drop in HQ Global's long position.The idea behind General Motors and HQ Global Education 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.| HQ Global vs. Netflix | HQ Global vs. Atlanta Braves Holdings, | HQ Global vs. Madison Square Garden | HQ Global vs. Liberty Media |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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