Correlation Between GM and Weave Communications
Can any of the company-specific risk be diversified away by investing in both GM and Weave Communications 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 Weave Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Weave Communications, you can compare the effects of market volatilities on GM and Weave Communications 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 Weave Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Weave Communications.
Diversification Opportunities for GM and Weave Communications
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Weave is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Weave Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weave Communications 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 Weave Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weave Communications has no effect on the direction of GM i.e., GM and Weave Communications go up and down completely randomly.
Pair Corralation between GM and Weave Communications
Allowing for the 90-day total investment horizon GM is expected to generate 2.27 times less return on investment than Weave Communications. But when comparing it to its historical volatility, General Motors is 1.12 times less risky than Weave Communications. It trades about 0.08 of its potential returns per unit of risk. Weave Communications is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 839.00 in Weave Communications on September 1, 2024 and sell it today you would earn a total of 528.00 from holding Weave Communications or generate 62.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Weave Communications
Performance |
| Timeline |
| General Motors |
| Weave Communications |
GM and Weave Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Weave Communications
The main advantage of trading using opposite GM and Weave Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Weave Communications 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 Weave Communications will offset losses from the drop in Weave Communications' long position.The idea behind General Motors and Weave Communications 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.| Weave Communications vs. Clearwater Analytics Holdings | Weave Communications vs. Expensify | Weave Communications vs. Envestnet | Weave Communications vs. Enfusion |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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