Correlation Between GM and Motorcar Parts
Can any of the company-specific risk be diversified away by investing in both GM and Motorcar Parts 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 Motorcar Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Motorcar Parts of, you can compare the effects of market volatilities on GM and Motorcar Parts 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 Motorcar Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Motorcar Parts.
Diversification Opportunities for GM and Motorcar Parts
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Motorcar is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts 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 Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of GM i.e., GM and Motorcar Parts go up and down completely randomly.
Pair Corralation between GM and Motorcar Parts
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.47 times more return on investment than Motorcar Parts. However, General Motors is 2.14 times less risky than Motorcar Parts. It trades about 0.05 of its potential returns per unit of risk. Motorcar Parts of is currently generating about 0.0 per unit of risk. If you would invest 3,731 in General Motors on August 27, 2024 and sell it today you would earn a total of 2,122 from holding General Motors or generate 56.87% 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. Motorcar Parts of
Performance |
| Timeline |
| General Motors |
| Motorcar Parts |
GM and Motorcar Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Motorcar Parts
The main advantage of trading using opposite GM and Motorcar Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Motorcar Parts 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 Motorcar Parts will offset losses from the drop in Motorcar Parts' long position.The idea behind General Motors and Motorcar Parts of 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.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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |