Correlation Between GM and Impax Environmental
Can any of the company-specific risk be diversified away by investing in both GM and Impax Environmental 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 Impax Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Impax Environmental Markets, you can compare the effects of market volatilities on GM and Impax Environmental 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 Impax Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Impax Environmental.
Diversification Opportunities for GM and Impax Environmental
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Impax is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Impax Environmental Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impax Environmental 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 Impax Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impax Environmental has no effect on the direction of GM i.e., GM and Impax Environmental go up and down completely randomly.
Pair Corralation between GM and Impax Environmental
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.33 times more return on investment than Impax Environmental. However, GM is 2.33 times more volatile than Impax Environmental Markets. It trades about 0.05 of its potential returns per unit of risk. Impax Environmental Markets is currently generating about -0.02 per unit of risk. If you would invest 3,849 in General Motors on December 11, 2024 and sell it today you would earn a total of 979.00 from holding General Motors or generate 25.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.52% |
| Values | Daily Returns |
General Motors vs. Impax Environmental Markets
Performance |
| Timeline |
| General Motors |
| Impax Environmental |
GM and Impax Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Impax Environmental
The main advantage of trading using opposite GM and Impax Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Impax Environmental 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 Impax Environmental will offset losses from the drop in Impax Environmental's long position.The idea behind General Motors and Impax Environmental Markets 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.| Impax Environmental vs. Lowland Investment Co | ||
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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