Correlation Between GM and Quanex Building
Can any of the company-specific risk be diversified away by investing in both GM and Quanex Building 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 Quanex Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Quanex Building Products, you can compare the effects of market volatilities on GM and Quanex Building 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 Quanex Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Quanex Building.
Diversification Opportunities for GM and Quanex Building
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Quanex is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products 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 Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of GM i.e., GM and Quanex Building go up and down completely randomly.
Pair Corralation between GM and Quanex Building
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.34 times more return on investment than Quanex Building. However, GM is 1.34 times more volatile than Quanex Building Products. It trades about -0.05 of its potential returns per unit of risk. Quanex Building Products is currently generating about -0.24 per unit of risk. If you would invest 5,137 in General Motors on November 3, 2024 and sell it today you would lose (191.00) from holding General Motors or give up 3.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Quanex Building Products
Performance |
| Timeline |
| General Motors |
| Quanex Building Products |
GM and Quanex Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Quanex Building
The main advantage of trading using opposite GM and Quanex Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Quanex Building 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 Quanex Building will offset losses from the drop in Quanex Building's long position.The idea behind General Motors and Quanex Building Products 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.| Quanex Building vs. Gibraltar Industries | Quanex Building vs. Carpenter Technology | Quanex Building vs. Myers Industries | Quanex Building vs. Griffon |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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