Correlation Between GM and Rivalry Corp
Can any of the company-specific risk be diversified away by investing in both GM and Rivalry Corp 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 Rivalry Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Rivalry Corp, you can compare the effects of market volatilities on GM and Rivalry Corp 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 Rivalry Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Rivalry Corp.
Diversification Opportunities for GM and Rivalry Corp
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Rivalry is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Rivalry Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivalry Corp 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 Rivalry Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivalry Corp has no effect on the direction of GM i.e., GM and Rivalry Corp go up and down completely randomly.
Pair Corralation between GM and Rivalry Corp
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Rivalry Corp. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 4.05 times less risky than Rivalry Corp. The stock trades about -0.08 of its potential returns per unit of risk. The Rivalry Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 16.00 in Rivalry Corp on October 22, 2024 and sell it today you would earn a total of 4.00 from holding Rivalry Corp or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
General Motors vs. Rivalry Corp
Performance |
| Timeline |
| General Motors |
| Rivalry Corp |
GM and Rivalry Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Rivalry Corp
The main advantage of trading using opposite GM and Rivalry Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Rivalry Corp 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 Rivalry Corp will offset losses from the drop in Rivalry Corp's long position.The idea behind General Motors and Rivalry Corp 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.| Rivalry Corp vs. Overactive Media Corp | Rivalry Corp vs. East Side Games | Rivalry Corp vs. Voxtur Analytics Corp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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