Correlation Between GM and IFAN Financial
Can any of the company-specific risk be diversified away by investing in both GM and IFAN Financial 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 IFAN Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and IFAN Financial, you can compare the effects of market volatilities on GM and IFAN Financial 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 IFAN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and IFAN Financial.
Diversification Opportunities for GM and IFAN Financial
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and IFAN is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and IFAN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IFAN Financial 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 IFAN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IFAN Financial has no effect on the direction of GM i.e., GM and IFAN Financial go up and down completely randomly.
Pair Corralation between GM and IFAN Financial
Allowing for the 90-day total investment horizon GM is expected to generate 10.97 times less return on investment than IFAN Financial. But when comparing it to its historical volatility, General Motors is 17.26 times less risky than IFAN Financial. It trades about 0.13 of its potential returns per unit of risk. IFAN Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.05 in IFAN Financial on September 1, 2024 and sell it today you would lose (0.02) from holding IFAN Financial or give up 40.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. IFAN Financial
Performance |
| Timeline |
| General Motors |
| IFAN Financial |
GM and IFAN Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and IFAN Financial
The main advantage of trading using opposite GM and IFAN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, IFAN Financial 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 IFAN Financial will offset losses from the drop in IFAN Financial's long position.The idea behind General Motors and IFAN Financial 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.| IFAN Financial vs. American Leisure Holdings | IFAN Financial vs. Supurva Healthcare Group | IFAN Financial vs. China Health Management | IFAN Financial vs. Embrace Change Acquisition |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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