Correlation Between GM and Pzena International
Can any of the company-specific risk be diversified away by investing in both GM and Pzena International 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 Pzena International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Pzena International Small, you can compare the effects of market volatilities on GM and Pzena International 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 Pzena International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Pzena International.
Diversification Opportunities for GM and Pzena International
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Pzena is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Pzena International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena International Small 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 Pzena International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena International Small has no effect on the direction of GM i.e., GM and Pzena International go up and down completely randomly.
Pair Corralation between GM and Pzena International
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Pzena International. In addition to that, GM is 2.35 times more volatile than Pzena International Small. It trades about -0.08 of its total potential returns per unit of risk. Pzena International Small is currently generating about -0.12 per unit of volatility. If you would invest 1,061 in Pzena International Small on October 23, 2024 and sell it today you would lose (18.00) from holding Pzena International Small or give up 1.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Pzena International Small
Performance |
| Timeline |
| General Motors |
| Pzena International Small |
GM and Pzena International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Pzena International
The main advantage of trading using opposite GM and Pzena International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Pzena International 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 Pzena International will offset losses from the drop in Pzena International's long position.The idea behind General Motors and Pzena International Small 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.| Pzena International vs. Gabelli Gold Fund | Pzena International vs. Short Precious Metals | Pzena International vs. Gamco Global Gold | Pzena International vs. Invesco Gold Special |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |