Correlation Between GM and Santa Cruz
Can any of the company-specific risk be diversified away by investing in both GM and Santa Cruz 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 Santa Cruz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Santa Cruz County, you can compare the effects of market volatilities on GM and Santa Cruz 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 Santa Cruz. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Santa Cruz.
Diversification Opportunities for GM and Santa Cruz
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Santa is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Santa Cruz County in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santa Cruz County 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 Santa Cruz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santa Cruz County has no effect on the direction of GM i.e., GM and Santa Cruz go up and down completely randomly.
Pair Corralation between GM and Santa Cruz
Allowing for the 90-day total investment horizon GM is expected to generate 1.78 times less return on investment than Santa Cruz. In addition to that, GM is 2.03 times more volatile than Santa Cruz County. It trades about 0.04 of its total potential returns per unit of risk. Santa Cruz County is currently generating about 0.14 per unit of volatility. If you would invest 2,331 in Santa Cruz County on November 27, 2024 and sell it today you would earn a total of 1,794 from holding Santa Cruz County or generate 76.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 87.47% |
| Values | Daily Returns |
General Motors vs. Santa Cruz County
Performance |
| Timeline |
| General Motors |
| Santa Cruz County |
GM and Santa Cruz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Santa Cruz
The main advantage of trading using opposite GM and Santa Cruz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Santa Cruz 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 Santa Cruz will offset losses from the drop in Santa Cruz's long position.The idea behind General Motors and Santa Cruz County 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.| Santa Cruz vs. Harbor Bankshares | Santa Cruz vs. Liberty Northwest Bancorp | Santa Cruz vs. Pioneer Bankcorp | Santa Cruz vs. Summit Bancshares |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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