Correlation Between GM and Sleep Cycle
Can any of the company-specific risk be diversified away by investing in both GM and Sleep Cycle 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 Sleep Cycle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sleep Cycle AB, you can compare the effects of market volatilities on GM and Sleep Cycle 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 Sleep Cycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sleep Cycle.
Diversification Opportunities for GM and Sleep Cycle
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Sleep is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sleep Cycle AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Cycle AB 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 Sleep Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Cycle AB has no effect on the direction of GM i.e., GM and Sleep Cycle go up and down completely randomly.
Pair Corralation between GM and Sleep Cycle
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.58 times more return on investment than Sleep Cycle. However, GM is 1.58 times more volatile than Sleep Cycle AB. It trades about -0.3 of its potential returns per unit of risk. Sleep Cycle AB is currently generating about -0.48 per unit of risk. If you would invest 6,006 in General Motors on September 24, 2024 and sell it today you would lose (825.00) from holding General Motors or give up 13.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Sleep Cycle AB
Performance |
| Timeline |
| General Motors |
| Sleep Cycle AB |
GM and Sleep Cycle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sleep Cycle
The main advantage of trading using opposite GM and Sleep Cycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sleep Cycle 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 Sleep Cycle will offset losses from the drop in Sleep Cycle's long position.The idea behind General Motors and Sleep Cycle AB 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.| Sleep Cycle vs. Humble Group AB | Sleep Cycle vs. Enad Global 7 | Sleep Cycle vs. Goodbye Kansas Group | Sleep Cycle vs. Mekonomen AB |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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