Correlation Between GM and Summit Bank
Can any of the company-specific risk be diversified away by investing in both GM and Summit Bank 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 Summit Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Summit Bank Group, you can compare the effects of market volatilities on GM and Summit Bank 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 Summit Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Summit Bank.
Diversification Opportunities for GM and Summit Bank
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Summit is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Summit Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Bank Group 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 Summit Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Bank Group has no effect on the direction of GM i.e., GM and Summit Bank go up and down completely randomly.
Pair Corralation between GM and Summit Bank
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Summit Bank. In addition to that, GM is 1.98 times more volatile than Summit Bank Group. It trades about -0.06 of its total potential returns per unit of risk. Summit Bank Group is currently generating about -0.03 per unit of volatility. If you would invest 1,480 in Summit Bank Group on November 4, 2024 and sell it today you would lose (15.00) from holding Summit Bank Group or give up 1.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Summit Bank Group
Performance |
| Timeline |
| General Motors |
| Summit Bank Group |
GM and Summit Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Summit Bank
The main advantage of trading using opposite GM and Summit Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Summit Bank 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 Summit Bank will offset losses from the drop in Summit Bank's long position.The idea behind General Motors and Summit Bank Group 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.| Summit Bank vs. Savi Financial | Summit Bank vs. Pacific West Bancorp | Summit Bank vs. Commencement Bancorp | Summit Bank vs. Merchants Marine Bancorp |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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