Correlation Between GM and NSTAR
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By analyzing existing cross correlation between General Motors and NSTAR ELEC 32, you can compare the effects of market volatilities on GM and NSTAR 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 NSTAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and NSTAR.
Diversification Opportunities for GM and NSTAR
Excellent diversification
The 3 months correlation between GM and NSTAR is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NSTAR ELEC 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTAR ELEC 32 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 NSTAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTAR ELEC 32 has no effect on the direction of GM i.e., GM and NSTAR go up and down completely randomly.
Pair Corralation between GM and NSTAR
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.74 times more return on investment than NSTAR. However, GM is 3.74 times more volatile than NSTAR ELEC 32. It trades about 0.05 of its potential returns per unit of risk. NSTAR ELEC 32 is currently generating about 0.01 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,699 from holding General Motors or generate 44.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 87.07% |
| Values | Daily Returns |
General Motors vs. NSTAR ELEC 32
Performance |
| Timeline |
| General Motors |
| NSTAR ELEC 32 |
GM and NSTAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and NSTAR
The main advantage of trading using opposite GM and NSTAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, NSTAR 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 NSTAR will offset losses from the drop in NSTAR's long position.The idea behind General Motors and NSTAR ELEC 32 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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