Correlation Between GM and N Able
Can any of the company-specific risk be diversified away by investing in both GM and N Able 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 N Able into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and N Able Inc, you can compare the effects of market volatilities on GM and N Able 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 N Able. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and N Able.
Diversification Opportunities for GM and N Able
Pay attention - limited upside
The 3 months correlation between GM and NABL is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and N Able Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N Able Inc 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 N Able. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N Able Inc has no effect on the direction of GM i.e., GM and N Able go up and down completely randomly.
Pair Corralation between GM and N Able
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.21 times more return on investment than N Able. However, GM is 1.21 times more volatile than N Able Inc. It trades about 0.07 of its potential returns per unit of risk. N Able Inc is currently generating about -0.04 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. N Able Inc
Performance |
| Timeline |
| General Motors |
| N Able Inc |
GM and N Able Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and N Able
The main advantage of trading using opposite GM and N Able positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, N Able 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 N Able will offset losses from the drop in N Able's long position.The idea behind General Motors and N Able Inc 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.| N Able vs. Innodata | N Able vs. International Business Machines | N Able vs. Aurora Innovation | N Able vs. BigBearai Holdings |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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