Correlation Between GM and Molecular Data
Can any of the company-specific risk be diversified away by investing in both GM and Molecular Data 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 Molecular Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Molecular Data, you can compare the effects of market volatilities on GM and Molecular Data 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 Molecular Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Molecular Data.
Diversification Opportunities for GM and Molecular Data
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Molecular is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Molecular Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molecular Data 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 Molecular Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molecular Data has no effect on the direction of GM i.e., GM and Molecular Data go up and down completely randomly.
Pair Corralation between GM and Molecular Data
If you would invest 3,348 in General Motors on September 3, 2024 and sell it today you would earn a total of 2,156 from holding General Motors or generate 64.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 0.4% |
| Values | Daily Returns |
General Motors vs. Molecular Data
Performance |
| Timeline |
| General Motors |
| Molecular Data |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Molecular Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Molecular Data
The main advantage of trading using opposite GM and Molecular Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Molecular Data 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 Molecular Data will offset losses from the drop in Molecular Data's long position.The idea behind General Motors and Molecular Data 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.| Molecular Data vs. Valhi Inc | Molecular Data vs. Huntsman | Molecular Data vs. Lsb Industries | Molecular Data vs. Westlake Chemical Partners |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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