Correlation Between GM and Profoto Holding
Can any of the company-specific risk be diversified away by investing in both GM and Profoto Holding 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 Profoto Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Profoto Holding AB, you can compare the effects of market volatilities on GM and Profoto Holding 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 Profoto Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Profoto Holding.
Diversification Opportunities for GM and Profoto Holding
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Profoto is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Profoto Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profoto Holding AB 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 Profoto Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profoto Holding AB has no effect on the direction of GM i.e., GM and Profoto Holding go up and down completely randomly.
Pair Corralation between GM and Profoto Holding
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.57 times more return on investment than Profoto Holding. However, General Motors is 1.76 times less risky than Profoto Holding. It trades about 0.14 of its potential returns per unit of risk. Profoto Holding AB is currently generating about -0.01 per unit of risk. If you would invest 3,126 in General Motors on August 25, 2024 and sell it today you would earn a total of 2,727 from holding General Motors or generate 87.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Profoto Holding AB
Performance |
| Timeline |
| General Motors |
| Profoto Holding AB |
GM and Profoto Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Profoto Holding
The main advantage of trading using opposite GM and Profoto Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Profoto Holding 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 Profoto Holding will offset losses from the drop in Profoto Holding's long position.The idea behind General Motors and Profoto Holding AB 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.| Profoto Holding vs. Awardit AB | Profoto Holding vs. RVRC Holding AB | Profoto Holding vs. Smart Eye AB | Profoto Holding vs. KABE Group AB |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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