Correlation Between GM and Rafina Innovations
Can any of the company-specific risk be diversified away by investing in both GM and Rafina Innovations 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 Rafina Innovations into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Rafina Innovations, you can compare the effects of market volatilities on GM and Rafina Innovations 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 Rafina Innovations. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Rafina Innovations.
Diversification Opportunities for GM and Rafina Innovations
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Rafina is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Rafina Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rafina Innovations 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 Rafina Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rafina Innovations has no effect on the direction of GM i.e., GM and Rafina Innovations go up and down completely randomly.
Pair Corralation between GM and Rafina Innovations
Allowing for the 90-day total investment horizon GM is expected to generate 48.41 times less return on investment than Rafina Innovations. But when comparing it to its historical volatility, General Motors is 36.3 times less risky than Rafina Innovations. It trades about 0.05 of its potential returns per unit of risk. Rafina Innovations is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.05 in Rafina Innovations on October 23, 2024 and sell it today you would lose (0.04) from holding Rafina Innovations or give up 80.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Rafina Innovations
Performance |
| Timeline |
| General Motors |
| Rafina Innovations |
GM and Rafina Innovations Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Rafina Innovations
The main advantage of trading using opposite GM and Rafina Innovations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Rafina Innovations 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 Rafina Innovations will offset losses from the drop in Rafina Innovations' long position.The idea behind General Motors and Rafina Innovations 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.| Rafina Innovations vs. LENSAR Inc | Rafina Innovations vs. Sight Sciences | Rafina Innovations vs. STRATA Skin Sciences | Rafina Innovations vs. enVVeno Medical Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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