Correlation Between GM and Upstart Holdings
Can any of the company-specific risk be diversified away by investing in both GM and Upstart Holdings 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 Upstart Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Upstart Holdings, you can compare the effects of market volatilities on GM and Upstart Holdings 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 Upstart Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Upstart Holdings.
Diversification Opportunities for GM and Upstart Holdings
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Upstart is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Upstart Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Upstart 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 Upstart Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Upstart Holdings has no effect on the direction of GM i.e., GM and Upstart Holdings go up and down completely randomly.
Pair Corralation between GM and Upstart Holdings
Allowing for the 90-day total investment horizon GM is expected to generate 4.16 times less return on investment than Upstart Holdings. But when comparing it to its historical volatility, General Motors is 5.44 times less risky than Upstart Holdings. It trades about 0.26 of its potential returns per unit of risk. Upstart Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 5,198 in Upstart Holdings on August 27, 2024 and sell it today you would earn a total of 2,208 from holding Upstart Holdings or generate 42.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Upstart Holdings
Performance |
| Timeline |
| General Motors |
| Upstart Holdings |
GM and Upstart Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Upstart Holdings
The main advantage of trading using opposite GM and Upstart Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Upstart Holdings 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 Upstart Holdings will offset losses from the drop in Upstart Holdings' long position.The idea behind General Motors and Upstart 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.| Upstart Holdings vs. SoFi Technologies | Upstart Holdings vs. Visa Class A | Upstart Holdings vs. Mastercard | Upstart Holdings vs. American Express |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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