Correlation Between GM and Information Services
Can any of the company-specific risk be diversified away by investing in both GM and Information Services 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 Information Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Information Services, you can compare the effects of market volatilities on GM and Information Services 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 Information Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Information Services.
Diversification Opportunities for GM and Information Services
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Information is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of GM i.e., GM and Information Services go up and down completely randomly.
Pair Corralation between GM and Information Services
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.19 times more return on investment than Information Services. However, GM is 1.19 times more volatile than Information Services. It trades about 0.06 of its potential returns per unit of risk. Information Services is currently generating about 0.04 per unit of risk. If you would invest 3,263 in General Motors on September 14, 2024 and sell it today you would earn a total of 1,997 from holding General Motors or generate 61.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
General Motors vs. Information Services
Performance |
| Timeline |
| General Motors |
| Information Services |
GM and Information Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Information Services
The main advantage of trading using opposite GM and Information Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Information Services 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 Information Services will offset losses from the drop in Information Services' long position.The idea behind General Motors and Information Services 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.| Information Services vs. Ritchie Bros Auctioneers | Information Services vs. Transcontinental | Information Services vs. GDI Integrated | Information Services vs. Calian Technologies |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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