Correlation Between GM and Mendocino Brewing
Can any of the company-specific risk be diversified away by investing in both GM and Mendocino Brewing 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 Mendocino Brewing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Mendocino Brewing, you can compare the effects of market volatilities on GM and Mendocino Brewing 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 Mendocino Brewing. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mendocino Brewing.
Diversification Opportunities for GM and Mendocino Brewing
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Mendocino is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mendocino Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mendocino Brewing 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 Mendocino Brewing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mendocino Brewing has no effect on the direction of GM i.e., GM and Mendocino Brewing go up and down completely randomly.
Pair Corralation between GM and Mendocino Brewing
If you would invest 4,057 in General Motors on August 27, 2024 and sell it today you would earn a total of 1,796 from holding General Motors or generate 44.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 0.66% |
| Values | Daily Returns |
General Motors vs. Mendocino Brewing
Performance |
| Timeline |
| General Motors |
| Mendocino Brewing |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Mendocino Brewing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Mendocino Brewing
The main advantage of trading using opposite GM and Mendocino Brewing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Mendocino Brewing 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 Mendocino Brewing will offset losses from the drop in Mendocino Brewing's long position.The idea behind General Motors and Mendocino Brewing 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.| Mendocino Brewing vs. Molson Coors Brewing | Mendocino Brewing vs. Budweiser Brewing | Mendocino Brewing vs. Boston Beer | Mendocino Brewing vs. Anheuser Busch InBev SANV |
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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