Correlation Between GM and GENERAL
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By analyzing existing cross correlation between General Motors and GENERAL ELEC CAP, you can compare the effects of market volatilities on GM and GENERAL 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 GENERAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and GENERAL.
Diversification Opportunities for GM and GENERAL
Average diversification
The 3 months correlation between GM and GENERAL is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of GM i.e., GM and GENERAL go up and down completely randomly.
Pair Corralation between GM and GENERAL
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.07 times more return on investment than GENERAL. However, GM is 2.07 times more volatile than GENERAL ELEC CAP. It trades about 0.32 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about -0.68 per unit of risk. If you would invest 5,273 in General Motors on August 28, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 28.57% |
| Values | Daily Returns |
General Motors vs. GENERAL ELEC CAP
Performance |
| Timeline |
| General Motors |
| GENERAL ELEC CAP |
GM and GENERAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and GENERAL
The main advantage of trading using opposite GM and GENERAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, GENERAL 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 GENERAL will offset losses from the drop in GENERAL's long position.The idea behind General Motors and GENERAL ELEC CAP 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.| GENERAL vs. Pinterest | GENERAL vs. SmartStop Self Storage | GENERAL vs. Deluxe | GENERAL vs. National CineMedia |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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