Correlation Between GM and NVent Electric
Can any of the company-specific risk be diversified away by investing in both GM and NVent Electric 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 NVent Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and nVent Electric PLC, you can compare the effects of market volatilities on GM and NVent Electric 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 NVent Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and NVent Electric.
Diversification Opportunities for GM and NVent Electric
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and NVent is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and nVent Electric PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nVent Electric PLC 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 NVent Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of nVent Electric PLC has no effect on the direction of GM i.e., GM and NVent Electric go up and down completely randomly.
Pair Corralation between GM and NVent Electric
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.83 times more return on investment than NVent Electric. However, General Motors is 1.21 times less risky than NVent Electric. It trades about 0.12 of its potential returns per unit of risk. nVent Electric PLC is currently generating about 0.05 per unit of risk. If you would invest 5,197 in General Motors on August 31, 2024 and sell it today you would earn a total of 353.00 from holding General Motors or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. nVent Electric PLC
Performance |
| Timeline |
| General Motors |
| nVent Electric PLC |
GM and NVent Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and NVent Electric
The main advantage of trading using opposite GM and NVent Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, NVent Electric 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 NVent Electric will offset losses from the drop in NVent Electric's long position.The idea behind General Motors and nVent Electric PLC 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.| NVent Electric vs. Hubbell | NVent Electric vs. Advanced Energy Industries | NVent Electric vs. Vertiv Holdings Co | NVent Electric vs. Energizer 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Stocks Directory Find actively traded stocks across global markets |