Correlation Between GM and Laser Photonics
Can any of the company-specific risk be diversified away by investing in both GM and Laser Photonics 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 Laser Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Laser Photonics, you can compare the effects of market volatilities on GM and Laser Photonics 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 Laser Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Laser Photonics.
Diversification Opportunities for GM and Laser Photonics
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Laser is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Laser Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laser Photonics 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 Laser Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laser Photonics has no effect on the direction of GM i.e., GM and Laser Photonics go up and down completely randomly.
Pair Corralation between GM and Laser Photonics
Allowing for the 90-day total investment horizon GM is expected to generate 4.93 times less return on investment than Laser Photonics. But when comparing it to its historical volatility, General Motors is 5.9 times less risky than Laser Photonics. It trades about 0.07 of its potential returns per unit of risk. Laser Photonics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 388.00 in Laser Photonics on August 31, 2024 and sell it today you would earn a total of 171.00 from holding Laser Photonics or generate 44.07% 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. Laser Photonics
Performance |
| Timeline |
| General Motors |
| Laser Photonics |
GM and Laser Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Laser Photonics
The main advantage of trading using opposite GM and Laser Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Laser Photonics 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 Laser Photonics will offset losses from the drop in Laser Photonics' long position.The idea behind General Motors and Laser Photonics 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.| Laser Photonics vs. Nuburu Inc | Laser Photonics vs. JE Cleantech Holdings | Laser Photonics vs. Reelcause | Laser Photonics vs. Shapeways Holdings, Common |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |