Correlation Between GM and Global Crossing
Can any of the company-specific risk be diversified away by investing in both GM and Global Crossing 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 Global Crossing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Global Crossing Airlines, you can compare the effects of market volatilities on GM and Global Crossing 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 Global Crossing. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Global Crossing.
Diversification Opportunities for GM and Global Crossing
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Global is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Global Crossing Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Crossing Airlines 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 Global Crossing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Crossing Airlines has no effect on the direction of GM i.e., GM and Global Crossing go up and down completely randomly.
Pair Corralation between GM and Global Crossing
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.54 times more return on investment than Global Crossing. However, General Motors is 1.86 times less risky than Global Crossing. It trades about 0.05 of its potential returns per unit of risk. Global Crossing Airlines is currently generating about -0.02 per unit of risk. If you would invest 3,731 in General Motors on August 27, 2024 and sell it today you would earn a total of 2,122 from holding General Motors or generate 56.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
General Motors vs. Global Crossing Airlines
Performance |
| Timeline |
| General Motors |
| Global Crossing Airlines |
GM and Global Crossing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Global Crossing
The main advantage of trading using opposite GM and Global Crossing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Global Crossing 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 Global Crossing will offset losses from the drop in Global Crossing's long position.The idea behind General Motors and Global Crossing Airlines 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.| Global Crossing vs. Suncor Energy | Global Crossing vs. Cineplex | Global Crossing vs. Enbridge | Global Crossing vs. BlackBerry |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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