Correlation Between GM and Private Equity
Can any of the company-specific risk be diversified away by investing in both GM and Private Equity 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 Private Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Private Equity Holding, you can compare the effects of market volatilities on GM and Private Equity 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 Private Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Private Equity.
Diversification Opportunities for GM and Private Equity
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Private is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Private Equity Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Private Equity Holding 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 Private Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Private Equity Holding has no effect on the direction of GM i.e., GM and Private Equity go up and down completely randomly.
Pair Corralation between GM and Private Equity
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.28 times more return on investment than Private Equity. However, GM is 1.28 times more volatile than Private Equity Holding. It trades about 0.13 of its potential returns per unit of risk. Private Equity Holding is currently generating about 0.01 per unit of risk. If you would invest 2,879 in General Motors on September 1, 2024 and sell it today you would earn a total of 2,680 from holding General Motors or generate 93.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.08% |
| Values | Daily Returns |
General Motors vs. Private Equity Holding
Performance |
| Timeline |
| General Motors |
| Private Equity Holding |
GM and Private Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Private Equity
The main advantage of trading using opposite GM and Private Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Private Equity 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 Private Equity will offset losses from the drop in Private Equity's long position.The idea behind General Motors and Private Equity Holding 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.| Private Equity vs. HIAG Immobilien Holding | Private Equity vs. Bellevue Group AG | Private Equity vs. Feintool International Holding | Private Equity vs. Procimmo Real Estate |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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