Correlation Between GM and Walthausen Small
Can any of the company-specific risk be diversified away by investing in both GM and Walthausen Small 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 Walthausen Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Walthausen Small Cap, you can compare the effects of market volatilities on GM and Walthausen Small 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 Walthausen Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Walthausen Small.
Diversification Opportunities for GM and Walthausen Small
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Walthausen is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Walthausen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walthausen Small 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 Walthausen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walthausen Small Cap has no effect on the direction of GM i.e., GM and Walthausen Small go up and down completely randomly.
Pair Corralation between GM and Walthausen Small
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.66 times more return on investment than Walthausen Small. However, GM is 1.66 times more volatile than Walthausen Small Cap. It trades about 0.05 of its potential returns per unit of risk. Walthausen Small Cap is currently generating about 0.05 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Walthausen Small Cap
Performance |
| Timeline |
| General Motors |
| Walthausen Small Cap |
GM and Walthausen Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Walthausen Small
The main advantage of trading using opposite GM and Walthausen Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Walthausen Small 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 Walthausen Small will offset losses from the drop in Walthausen Small's long position.The idea behind General Motors and Walthausen Small 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.| Walthausen Small vs. Vanguard Information Technology | Walthausen Small vs. Red Oak Technology | Walthausen Small vs. Dreyfus Technology Growth | Walthausen Small vs. Allianzgi Technology Fund |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |