Correlation Between GM and Sentinel Small
Can any of the company-specific risk be diversified away by investing in both GM and Sentinel Small 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 Sentinel Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sentinel Small Pany, you can compare the effects of market volatilities on GM and Sentinel Small 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 Sentinel Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sentinel Small.
Diversification Opportunities for GM and Sentinel Small
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Sentinel is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sentinel Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Small Pany 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 Sentinel Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Small Pany has no effect on the direction of GM i.e., GM and Sentinel Small go up and down completely randomly.
Pair Corralation between GM and Sentinel Small
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.38 times more return on investment than Sentinel Small. However, GM is 1.38 times more volatile than Sentinel Small Pany. It trades about 0.26 of its potential returns per unit of risk. Sentinel Small Pany is currently generating about 0.22 per unit of risk. If you would invest 5,273 in General Motors on August 27, 2024 and sell it today you would earn a total of 580.00 from holding General Motors or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Sentinel Small Pany
Performance |
| Timeline |
| General Motors |
| Sentinel Small Pany |
GM and Sentinel Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sentinel Small
The main advantage of trading using opposite GM and Sentinel Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sentinel Small 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 Sentinel Small will offset losses from the drop in Sentinel Small's long position.The idea behind General Motors and Sentinel Small Pany 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.| Sentinel Small vs. Vy Blackrock Inflation | Sentinel Small vs. Ab Municipal Bond | Sentinel Small vs. Arrow Managed Futures | Sentinel Small vs. Aqr Managed Futures |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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