Correlation Between GM and Roth CH
Can any of the company-specific risk be diversified away by investing in both GM and Roth CH 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 Roth CH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Roth CH Acquisition, you can compare the effects of market volatilities on GM and Roth CH 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 Roth CH. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Roth CH.
Diversification Opportunities for GM and Roth CH
Very poor diversification
The 3 months correlation between GM and Roth is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Roth CH Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roth CH Acquisition 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 Roth CH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roth CH Acquisition has no effect on the direction of GM i.e., GM and Roth CH go up and down completely randomly.
Pair Corralation between GM and Roth CH
Allowing for the 90-day total investment horizon GM is expected to generate 15.51 times less return on investment than Roth CH. But when comparing it to its historical volatility, General Motors is 3.88 times less risky than Roth CH. It trades about 0.05 of its potential returns per unit of risk. Roth CH Acquisition is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Roth CH Acquisition on September 3, 2024 and sell it today you would earn a total of 27.00 from holding Roth CH Acquisition or generate 135.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 14.14% |
| Values | Daily Returns |
General Motors vs. Roth CH Acquisition
Performance |
| Timeline |
| General Motors |
| Roth CH Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Roth CH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Roth CH
The main advantage of trading using opposite GM and Roth CH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Roth CH 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 Roth CH will offset losses from the drop in Roth CH's long position.The idea behind General Motors and Roth CH Acquisition 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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