Correlation Between GM and Madison High
Can any of the company-specific risk be diversified away by investing in both GM and Madison High 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 Madison High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Madison High Quality, you can compare the effects of market volatilities on GM and Madison High 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 Madison High. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Madison High.
Diversification Opportunities for GM and Madison High
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Madison is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Madison High Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison High Quality 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 Madison High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison High Quality has no effect on the direction of GM i.e., GM and Madison High go up and down completely randomly.
Pair Corralation between GM and Madison High
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Madison High. In addition to that, GM is 16.1 times more volatile than Madison High Quality. It trades about -0.06 of its total potential returns per unit of risk. Madison High Quality is currently generating about 0.13 per unit of volatility. If you would invest 1,032 in Madison High Quality on November 4, 2024 and sell it today you would earn a total of 5.00 from holding Madison High Quality or generate 0.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Madison High Quality
Performance |
| Timeline |
| General Motors |
| Madison High Quality |
GM and Madison High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Madison High
The main advantage of trading using opposite GM and Madison High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Madison High 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 Madison High will offset losses from the drop in Madison High's long position.The idea behind General Motors and Madison High Quality 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.| Madison High vs. Gabelli Global Financial | Madison High vs. Vanguard Money Market | Madison High vs. Blackstone Secured Lending | Madison High vs. Voya Government Money |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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