Correlation Between GM and Magnis Energy
Can any of the company-specific risk be diversified away by investing in both GM and Magnis Energy 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 Magnis Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Magnis Energy Technologies, you can compare the effects of market volatilities on GM and Magnis Energy 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 Magnis Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Magnis Energy.
Diversification Opportunities for GM and Magnis Energy
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Magnis is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Magnis Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnis Energy Techno 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 Magnis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnis Energy Techno has no effect on the direction of GM i.e., GM and Magnis Energy go up and down completely randomly.
Pair Corralation between GM and Magnis Energy
Allowing for the 90-day total investment horizon GM is expected to generate 6.84 times less return on investment than Magnis Energy. But when comparing it to its historical volatility, General Motors is 6.15 times less risky than Magnis Energy. It trades about 0.07 of its potential returns per unit of risk. Magnis Energy Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3.00 in Magnis Energy Technologies on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Magnis Energy Technologies or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. Magnis Energy Technologies
Performance |
| Timeline |
| General Motors |
| Magnis Energy Techno |
GM and Magnis Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Magnis Energy
The main advantage of trading using opposite GM and Magnis Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Magnis Energy 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 Magnis Energy will offset losses from the drop in Magnis Energy's long position.The idea behind General Motors and Magnis Energy Technologies 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.| Magnis Energy vs. Novonix Ltd ADR | Magnis Energy vs. Ilika plc | Magnis Energy vs. FuelPositive Corp | Magnis Energy vs. Novonix |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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