Correlation Between GM and Riverpark/next Century
Can any of the company-specific risk be diversified away by investing in both GM and Riverpark/next Century 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 Riverpark/next Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Riverparknext Century Gr, you can compare the effects of market volatilities on GM and Riverpark/next Century 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 Riverpark/next Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Riverpark/next Century.
Diversification Opportunities for GM and Riverpark/next Century
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Riverpark/next is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Riverparknext Century Gr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverpark/next Century 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 Riverpark/next Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverpark/next Century has no effect on the direction of GM i.e., GM and Riverpark/next Century go up and down completely randomly.
Pair Corralation between GM and Riverpark/next Century
Allowing for the 90-day total investment horizon GM is expected to generate 1.11 times less return on investment than Riverpark/next Century. In addition to that, GM is 1.2 times more volatile than Riverparknext Century Gr. It trades about 0.28 of its total potential returns per unit of risk. Riverparknext Century Gr is currently generating about 0.38 per unit of volatility. If you would invest 1,029 in Riverparknext Century Gr on August 26, 2024 and sell it today you would earn a total of 144.00 from holding Riverparknext Century Gr or generate 13.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Riverparknext Century Gr
Performance |
| Timeline |
| General Motors |
| Riverpark/next Century |
GM and Riverpark/next Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Riverpark/next Century
The main advantage of trading using opposite GM and Riverpark/next Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Riverpark/next Century 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 Riverpark/next Century will offset losses from the drop in Riverpark/next Century's long position.The idea behind General Motors and Riverparknext Century Gr 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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