Correlation Between GM and Premiere Entertainment
Can any of the company-specific risk be diversified away by investing in both GM and Premiere Entertainment 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 Premiere Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Premiere Entertainment, you can compare the effects of market volatilities on GM and Premiere Entertainment 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 Premiere Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Premiere Entertainment.
Diversification Opportunities for GM and Premiere Entertainment
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Premiere is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Premiere Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premiere Entertainment 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 Premiere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premiere Entertainment has no effect on the direction of GM i.e., GM and Premiere Entertainment go up and down completely randomly.
Pair Corralation between GM and Premiere Entertainment
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Premiere Entertainment. In addition to that, GM is 1.48 times more volatile than Premiere Entertainment. It trades about -0.13 of its total potential returns per unit of risk. Premiere Entertainment is currently generating about 0.01 per unit of volatility. If you would invest 17.00 in Premiere Entertainment on November 5, 2024 and sell it today you would earn a total of 0.00 from holding Premiere Entertainment or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
General Motors vs. Premiere Entertainment
Performance |
| Timeline |
| General Motors |
| Premiere Entertainment |
GM and Premiere Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Premiere Entertainment
The main advantage of trading using opposite GM and Premiere Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Premiere Entertainment 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 Premiere Entertainment will offset losses from the drop in Premiere Entertainment's long position.The idea behind General Motors and Premiere Entertainment 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.| Premiere Entertainment vs. National Reinsurance | Premiere Entertainment vs. Lepanto Consolidated Mining | Premiere Entertainment vs. Apex Mining Co | Premiere Entertainment vs. Metropolitan Bank Trust |
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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