Correlation Between GM and Parkd
Can any of the company-specific risk be diversified away by investing in both GM and Parkd 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 Parkd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Parkd, you can compare the effects of market volatilities on GM and Parkd 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 Parkd. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Parkd.
Diversification Opportunities for GM and Parkd
Weak diversification
The 3 months correlation between GM and Parkd is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Parkd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parkd 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 Parkd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parkd has no effect on the direction of GM i.e., GM and Parkd go up and down completely randomly.
Pair Corralation between GM and Parkd
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.73 times more return on investment than Parkd. However, General Motors is 1.37 times less risky than Parkd. It trades about 0.07 of its potential returns per unit of risk. Parkd is currently generating about -0.09 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. Parkd
Performance |
| Timeline |
| General Motors |
| Parkd |
GM and Parkd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Parkd
The main advantage of trading using opposite GM and Parkd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Parkd 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 Parkd will offset losses from the drop in Parkd's long position.The idea behind General Motors and Parkd 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.| Parkd vs. Qbe Insurance Group | Parkd vs. Kkr Credit Income | Parkd vs. Kip McGrath Education | Parkd vs. National Australia Bank |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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