Correlation Between GM and Tempo Automation
Can any of the company-specific risk be diversified away by investing in both GM and Tempo Automation 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 Tempo Automation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Tempo Automation Holdings, you can compare the effects of market volatilities on GM and Tempo Automation 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 Tempo Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Tempo Automation.
Diversification Opportunities for GM and Tempo Automation
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Tempo is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tempo Automation Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tempo Automation Holdings 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 Tempo Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tempo Automation Holdings has no effect on the direction of GM i.e., GM and Tempo Automation go up and down completely randomly.
Pair Corralation between GM and Tempo Automation
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.18 times more return on investment than Tempo Automation. However, General Motors is 5.55 times less risky than Tempo Automation. It trades about 0.05 of its potential returns per unit of risk. Tempo Automation Holdings is currently generating about -0.08 per unit of risk. If you would invest 3,731 in General Motors on August 27, 2024 and sell it today you would earn a total of 2,122 from holding General Motors or generate 56.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 31.65% |
| Values | Daily Returns |
General Motors vs. Tempo Automation Holdings
Performance |
| Timeline |
| General Motors |
| Tempo Automation Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Tempo Automation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Tempo Automation
The main advantage of trading using opposite GM and Tempo Automation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Tempo Automation 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 Tempo Automation will offset losses from the drop in Tempo Automation's long position.The idea behind General Motors and Tempo Automation Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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