Correlation Between GM and Cambria Micro
Can any of the company-specific risk be diversified away by investing in both GM and Cambria Micro 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 Cambria Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Cambria Micro And, you can compare the effects of market volatilities on GM and Cambria Micro 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 Cambria Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Cambria Micro.
Diversification Opportunities for GM and Cambria Micro
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Cambria is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Cambria Micro And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Micro And 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 Cambria Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Micro And has no effect on the direction of GM i.e., GM and Cambria Micro go up and down completely randomly.
Pair Corralation between GM and Cambria Micro
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.85 times more return on investment than Cambria Micro. However, GM is 1.85 times more volatile than Cambria Micro And. It trades about 0.03 of its potential returns per unit of risk. Cambria Micro And is currently generating about 0.03 per unit of risk. If you would invest 4,155 in General Motors on November 5, 2024 and sell it today you would earn a total of 791.00 from holding General Motors or generate 19.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 55.06% |
| Values | Daily Returns |
General Motors vs. Cambria Micro And
Performance |
| Timeline |
| General Motors |
| Cambria Micro And |
GM and Cambria Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Cambria Micro
The main advantage of trading using opposite GM and Cambria Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Cambria Micro 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 Cambria Micro will offset losses from the drop in Cambria Micro's long position.The idea behind General Motors and Cambria Micro And 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.| Cambria Micro vs. JPMorgan Fundamental Data | Cambria Micro vs. Davis Select International | Cambria Micro vs. Dimensional ETF Trust | Cambria Micro vs. Principal Value ETF |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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