Correlation Between GM and Infinera
Can any of the company-specific risk be diversified away by investing in both GM and Infinera 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 Infinera into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Infinera, you can compare the effects of market volatilities on GM and Infinera 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 Infinera. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Infinera.
Diversification Opportunities for GM and Infinera
Average diversification
The 3 months correlation between GM and Infinera is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Infinera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinera 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 Infinera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinera has no effect on the direction of GM i.e., GM and Infinera go up and down completely randomly.
Pair Corralation between GM and Infinera
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Infinera. In addition to that, GM is 8.16 times more volatile than Infinera. It trades about -0.09 of its total potential returns per unit of risk. Infinera is currently generating about 0.04 per unit of volatility. If you would invest 660.00 in Infinera on November 9, 2024 and sell it today you would earn a total of 2.00 from holding Infinera or generate 0.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Infinera
Performance |
| Timeline |
| General Motors |
| Infinera |
GM and Infinera Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Infinera
The main advantage of trading using opposite GM and Infinera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Infinera 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 Infinera will offset losses from the drop in Infinera's long position.The idea behind General Motors and Infinera 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.| Infinera vs. Juniper Networks | Infinera vs. Lumentum Holdings | Infinera vs. Extreme Networks | Infinera vs. Clearfield |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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