Correlation Between GM and Gibraltar Industries
Can any of the company-specific risk be diversified away by investing in both GM and Gibraltar Industries 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 Gibraltar Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Gibraltar Industries, you can compare the effects of market volatilities on GM and Gibraltar Industries 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 Gibraltar Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Gibraltar Industries.
Diversification Opportunities for GM and Gibraltar Industries
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Gibraltar is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Gibraltar Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gibraltar Industries 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 Gibraltar Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gibraltar Industries has no effect on the direction of GM i.e., GM and Gibraltar Industries go up and down completely randomly.
Pair Corralation between GM and Gibraltar Industries
Allowing for the 90-day total investment horizon GM is expected to generate 1.35 times less return on investment than Gibraltar Industries. But when comparing it to its historical volatility, General Motors is 1.14 times less risky than Gibraltar Industries. It trades about 0.14 of its potential returns per unit of risk. Gibraltar Industries is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 6,509 in Gibraltar Industries on August 24, 2024 and sell it today you would earn a total of 463.00 from holding Gibraltar Industries or generate 7.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Gibraltar Industries
Performance |
| Timeline |
| General Motors |
| Gibraltar Industries |
GM and Gibraltar Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Gibraltar Industries
The main advantage of trading using opposite GM and Gibraltar Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Gibraltar Industries 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 Gibraltar Industries will offset losses from the drop in Gibraltar Industries' long position.The idea behind General Motors and Gibraltar Industries 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.| Gibraltar Industries vs. Quanex Building Products | Gibraltar Industries vs. Jeld Wen Holding | Gibraltar Industries vs. Perma Pipe International Holdings | Gibraltar Industries vs. Interface |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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