Correlation Between GM and Smartmetric
Can any of the company-specific risk be diversified away by investing in both GM and Smartmetric 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 Smartmetric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Smartmetric, you can compare the effects of market volatilities on GM and Smartmetric 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 Smartmetric. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Smartmetric.
Diversification Opportunities for GM and Smartmetric
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Smartmetric is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Smartmetric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smartmetric 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 Smartmetric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smartmetric has no effect on the direction of GM i.e., GM and Smartmetric go up and down completely randomly.
Pair Corralation between GM and Smartmetric
Allowing for the 90-day total investment horizon GM is expected to generate 598.44 times less return on investment than Smartmetric. But when comparing it to its historical volatility, General Motors is 157.81 times less risky than Smartmetric. It trades about 0.12 of its potential returns per unit of risk. Smartmetric is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 0.02 in Smartmetric on August 31, 2024 and sell it today you would lose (0.01) from holding Smartmetric or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Smartmetric
Performance |
| Timeline |
| General Motors |
| Smartmetric |
GM and Smartmetric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Smartmetric
The main advantage of trading using opposite GM and Smartmetric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Smartmetric 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 Smartmetric will offset losses from the drop in Smartmetric's long position.The idea behind General Motors and Smartmetric 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.| Smartmetric vs. Telos Corp | Smartmetric vs. Fuse Science | Smartmetric vs. Data443 Risk Mitigation | Smartmetric vs. Taoping |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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