Correlation Between GM and Huber Capital
Can any of the company-specific risk be diversified away by investing in both GM and Huber Capital 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 Huber Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Huber Capital Small, you can compare the effects of market volatilities on GM and Huber Capital 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 Huber Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Huber Capital.
Diversification Opportunities for GM and Huber Capital
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Huber is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Huber Capital Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huber Capital Small 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 Huber Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huber Capital Small has no effect on the direction of GM i.e., GM and Huber Capital go up and down completely randomly.
Pair Corralation between GM and Huber Capital
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.67 times more return on investment than Huber Capital. However, GM is 1.67 times more volatile than Huber Capital Small. It trades about 0.07 of its potential returns per unit of risk. Huber Capital Small is currently generating about 0.06 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Huber Capital Small
Performance |
| Timeline |
| General Motors |
| Huber Capital Small |
GM and Huber Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Huber Capital
The main advantage of trading using opposite GM and Huber Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Huber Capital 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 Huber Capital will offset losses from the drop in Huber Capital's long position.The idea behind General Motors and Huber Capital Small 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.| Huber Capital vs. Franklin Lifesmart Retirement | Huber Capital vs. Transamerica Cleartrack Retirement | Huber Capital vs. Blackrock Moderate Prepared | Huber Capital vs. Wisdomtree Siegel Moderate |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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