Correlation Between GM and Media Investment
Can any of the company-specific risk be diversified away by investing in both GM and Media Investment 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 Media Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Media Investment Optimization, you can compare the effects of market volatilities on GM and Media Investment 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 Media Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Media Investment.
Diversification Opportunities for GM and Media Investment
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Media is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Media Investment Optimization in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media Investment Opt 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 Media Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media Investment Opt has no effect on the direction of GM i.e., GM and Media Investment go up and down completely randomly.
Pair Corralation between GM and Media Investment
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.5 times more return on investment than Media Investment. However, General Motors is 2.0 times less risky than Media Investment. It trades about 0.03 of its potential returns per unit of risk. Media Investment Optimization is currently generating about -0.02 per unit of risk. If you would invest 4,115 in General Motors on November 4, 2024 and sell it today you would earn a total of 831.00 from holding General Motors or generate 20.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.21% |
| Values | Daily Returns |
General Motors vs. Media Investment Optimization
Performance |
| Timeline |
| General Motors |
| Media Investment Opt |
GM and Media Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Media Investment
The main advantage of trading using opposite GM and Media Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Media Investment 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 Media Investment will offset losses from the drop in Media Investment's long position.The idea behind General Motors and Media Investment Optimization 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.| Media Investment vs. Tier1 Technology SA | Media Investment vs. Elaia Investment Spain | Media Investment vs. Arteche Lantegi Elkartea | Media Investment vs. Energy Solar Tech |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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