Correlation Between GM and Tetragon Financial
Can any of the company-specific risk be diversified away by investing in both GM and Tetragon Financial 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 Tetragon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Tetragon Financial Group, you can compare the effects of market volatilities on GM and Tetragon Financial 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 Tetragon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Tetragon Financial.
Diversification Opportunities for GM and Tetragon Financial
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Tetragon is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tetragon Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tetragon Financial 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 Tetragon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tetragon Financial has no effect on the direction of GM i.e., GM and Tetragon Financial go up and down completely randomly.
Pair Corralation between GM and Tetragon Financial
Allowing for the 90-day total investment horizon GM is expected to generate 1.91 times less return on investment than Tetragon Financial. In addition to that, GM is 1.36 times more volatile than Tetragon Financial Group. It trades about 0.04 of its total potential returns per unit of risk. Tetragon Financial Group is currently generating about 0.1 per unit of volatility. If you would invest 899.00 in Tetragon Financial Group on October 25, 2024 and sell it today you would earn a total of 746.00 from holding Tetragon Financial Group or generate 82.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 92.71% |
| Values | Daily Returns |
General Motors vs. Tetragon Financial Group
Performance |
| Timeline |
| General Motors |
| Tetragon Financial |
GM and Tetragon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Tetragon Financial
The main advantage of trading using opposite GM and Tetragon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Tetragon Financial 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 Tetragon Financial will offset losses from the drop in Tetragon Financial's long position.The idea behind General Motors and Tetragon Financial 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.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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