Correlation Between GM and 1CM
Can any of the company-specific risk be diversified away by investing in both GM and 1CM 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 1CM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and 1CM Inc, you can compare the effects of market volatilities on GM and 1CM 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 1CM. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and 1CM.
Diversification Opportunities for GM and 1CM
Good diversification
The 3 months correlation between GM and 1CM is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and 1CM Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1CM Inc 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 1CM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1CM Inc has no effect on the direction of GM i.e., GM and 1CM go up and down completely randomly.
Pair Corralation between GM and 1CM
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.56 times more return on investment than 1CM. However, General Motors is 1.79 times less risky than 1CM. It trades about 0.2 of its potential returns per unit of risk. 1CM Inc is currently generating about 0.02 per unit of risk. If you would invest 4,807 in General Motors on August 25, 2024 and sell it today you would earn a total of 1,046 from holding General Motors or generate 21.76% 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. 1CM Inc
Performance |
| Timeline |
| General Motors |
| 1CM Inc |
GM and 1CM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and 1CM
The main advantage of trading using opposite GM and 1CM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, 1CM 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 1CM will offset losses from the drop in 1CM's long position.The idea behind General Motors and 1CM Inc 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.| 1CM vs. Green Cures Botanical | 1CM vs. Galexxy Holdings | 1CM vs. Indoor Harvest Corp | 1CM vs. Speakeasy Cannabis Club |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |