Correlation Between GM and Nicholas
Can any of the company-specific risk be diversified away by investing in both GM and Nicholas 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 Nicholas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nicholas Ii Inc, you can compare the effects of market volatilities on GM and Nicholas 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 Nicholas. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nicholas.
Diversification Opportunities for GM and Nicholas
Very poor diversification
The 3 months correlation between GM and Nicholas is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nicholas Ii Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Ii 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 Nicholas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Ii has no effect on the direction of GM i.e., GM and Nicholas go up and down completely randomly.
Pair Corralation between GM and Nicholas
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.65 times more return on investment than Nicholas. However, GM is 2.65 times more volatile than Nicholas Ii Inc. It trades about 0.09 of its potential returns per unit of risk. Nicholas Ii Inc is currently generating about 0.11 per unit of risk. If you would invest 4,476 in General Motors on August 29, 2024 and sell it today you would earn a total of 1,074 from holding General Motors or generate 23.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Nicholas Ii Inc
Performance |
| Timeline |
| General Motors |
| Nicholas Ii |
GM and Nicholas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nicholas
The main advantage of trading using opposite GM and Nicholas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nicholas 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 Nicholas will offset losses from the drop in Nicholas' long position.The idea behind General Motors and Nicholas Ii 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.| Nicholas vs. Nicholas Fund Inc | Nicholas vs. Nicholas Ltd Edition | Nicholas vs. Nicholas Equity Income | Nicholas vs. Moderate Duration Fund |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |