Correlation Between GM and Papaya Growth
Can any of the company-specific risk be diversified away by investing in both GM and Papaya Growth 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 Papaya Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Papaya Growth Opportunity, you can compare the effects of market volatilities on GM and Papaya Growth 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 Papaya Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Papaya Growth.
Diversification Opportunities for GM and Papaya Growth
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Papaya is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Papaya Growth Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papaya Growth Opportunity 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 Papaya Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papaya Growth Opportunity has no effect on the direction of GM i.e., GM and Papaya Growth go up and down completely randomly.
Pair Corralation between GM and Papaya Growth
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.15 times more return on investment than Papaya Growth. However, General Motors is 6.68 times less risky than Papaya Growth. It trades about 0.16 of its potential returns per unit of risk. Papaya Growth Opportunity is currently generating about -0.43 per unit of risk. If you would invest 5,096 in General Motors on September 2, 2024 and sell it today you would earn a total of 463.00 from holding General Motors or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 33.33% |
| Values | Daily Returns |
General Motors vs. Papaya Growth Opportunity
Performance |
| Timeline |
| General Motors |
| Papaya Growth Opportunity |
GM and Papaya Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Papaya Growth
The main advantage of trading using opposite GM and Papaya Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Papaya Growth 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 Papaya Growth will offset losses from the drop in Papaya Growth's long position.The idea behind General Motors and Papaya Growth Opportunity 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.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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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