Correlation Between GM and Inventronics
Can any of the company-specific risk be diversified away by investing in both GM and Inventronics 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 Inventronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Inventronics, you can compare the effects of market volatilities on GM and Inventronics 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 Inventronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Inventronics.
Diversification Opportunities for GM and Inventronics
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Inventronics is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Inventronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inventronics 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 Inventronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inventronics has no effect on the direction of GM i.e., GM and Inventronics go up and down completely randomly.
Pair Corralation between GM and Inventronics
Allowing for the 90-day total investment horizon GM is expected to generate 1.2 times less return on investment than Inventronics. But when comparing it to its historical volatility, General Motors is 2.29 times less risky than Inventronics. It trades about 0.08 of its potential returns per unit of risk. Inventronics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 67.00 in Inventronics on September 1, 2024 and sell it today you would earn a total of 8.00 from holding Inventronics or generate 11.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Inventronics
Performance |
| Timeline |
| General Motors |
| Inventronics |
GM and Inventronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Inventronics
The main advantage of trading using opposite GM and Inventronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Inventronics 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 Inventronics will offset losses from the drop in Inventronics' long position.The idea behind General Motors and Inventronics 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.| Inventronics vs. Caldwell Partners International | Inventronics vs. Goodfellow | Inventronics vs. Supremex | Inventronics vs. Velan Inc |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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