Correlation Between GM and St Joe
Can any of the company-specific risk be diversified away by investing in both GM and St Joe 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 St Joe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and St Joe Company, you can compare the effects of market volatilities on GM and St Joe 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 St Joe. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and St Joe.
Diversification Opportunities for GM and St Joe
Pay attention - limited upside
The 3 months correlation between GM and JOE is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and St Joe Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Joe Company 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 St Joe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Joe Company has no effect on the direction of GM i.e., GM and St Joe go up and down completely randomly.
Pair Corralation between GM and St Joe
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.01 times more return on investment than St Joe. However, GM is 1.01 times more volatile than St Joe Company. It trades about 0.07 of its potential returns per unit of risk. St Joe Company is currently generating about 0.03 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. St Joe Company
Performance |
| Timeline |
| General Motors |
| St Joe Company |
GM and St Joe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and St Joe
The main advantage of trading using opposite GM and St Joe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, St Joe 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 St Joe will offset losses from the drop in St Joe's long position.The idea behind General Motors and St Joe Company 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.| St Joe vs. Stratus Properties | St Joe vs. Mitsui Fudosan Co | St Joe vs. New World Development | St Joe vs. Comstock Holding Companies |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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