Correlation Between GM and NTG Clarity
Can any of the company-specific risk be diversified away by investing in both GM and NTG Clarity 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 NTG Clarity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and NTG Clarity Networks, you can compare the effects of market volatilities on GM and NTG Clarity 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 NTG Clarity. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and NTG Clarity.
Diversification Opportunities for GM and NTG Clarity
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and NTG is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NTG Clarity Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTG Clarity Networks 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 NTG Clarity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTG Clarity Networks has no effect on the direction of GM i.e., GM and NTG Clarity go up and down completely randomly.
Pair Corralation between GM and NTG Clarity
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the NTG Clarity. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.0 times less risky than NTG Clarity. The stock trades about -0.08 of its potential returns per unit of risk. The NTG Clarity Networks is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 118.00 in NTG Clarity Networks on November 6, 2024 and sell it today you would earn a total of 62.00 from holding NTG Clarity Networks or generate 52.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.36% |
| Values | Daily Returns |
General Motors vs. NTG Clarity Networks
Performance |
| Timeline |
| General Motors |
| NTG Clarity Networks |
GM and NTG Clarity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and NTG Clarity
The main advantage of trading using opposite GM and NTG Clarity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, NTG Clarity 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 NTG Clarity will offset losses from the drop in NTG Clarity's long position.The idea behind General Motors and NTG Clarity Networks 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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