Correlation Between GM and Plumas Bancorp
Can any of the company-specific risk be diversified away by investing in both GM and Plumas Bancorp 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 Plumas Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Plumas Bancorp, you can compare the effects of market volatilities on GM and Plumas Bancorp 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 Plumas Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Plumas Bancorp.
Diversification Opportunities for GM and Plumas Bancorp
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Plumas is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Plumas Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumas Bancorp 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 Plumas Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumas Bancorp has no effect on the direction of GM i.e., GM and Plumas Bancorp go up and down completely randomly.
Pair Corralation between GM and Plumas Bancorp
Allowing for the 90-day total investment horizon GM is expected to generate 2.24 times less return on investment than Plumas Bancorp. In addition to that, GM is 1.36 times more volatile than Plumas Bancorp. It trades about 0.12 of its total potential returns per unit of risk. Plumas Bancorp is currently generating about 0.37 per unit of volatility. If you would invest 4,208 in Plumas Bancorp on August 31, 2024 and sell it today you would earn a total of 738.00 from holding Plumas Bancorp or generate 17.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Plumas Bancorp
Performance |
| Timeline |
| General Motors |
| Plumas Bancorp |
GM and Plumas Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Plumas Bancorp
The main advantage of trading using opposite GM and Plumas Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Plumas Bancorp 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 Plumas Bancorp will offset losses from the drop in Plumas Bancorp's long position.The idea behind General Motors and Plumas Bancorp 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.| Plumas Bancorp vs. Home Federal Bancorp | Plumas Bancorp vs. First Northwest Bancorp | Plumas Bancorp vs. Lake Shore Bancorp | Plumas Bancorp vs. Community West Bancshares |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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