Correlation Between GM and Wp Energy
Can any of the company-specific risk be diversified away by investing in both GM and Wp Energy 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 Wp Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Wp Energy Public, you can compare the effects of market volatilities on GM and Wp Energy 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 Wp Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Wp Energy.
Diversification Opportunities for GM and Wp Energy
Good diversification
The 3 months correlation between GM and Wp Energy is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Wp Energy Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wp Energy Public 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 Wp Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wp Energy Public has no effect on the direction of GM i.e., GM and Wp Energy go up and down completely randomly.
Pair Corralation between GM and Wp Energy
Allowing for the 90-day total investment horizon GM is expected to generate 19.47 times less return on investment than Wp Energy. But when comparing it to its historical volatility, General Motors is 33.43 times less risky than Wp Energy. It trades about 0.1 of its potential returns per unit of risk. Wp Energy Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 374.00 in Wp Energy Public on September 3, 2024 and sell it today you would lose (24.00) from holding Wp Energy Public or give up 6.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.37% |
| Values | Daily Returns |
General Motors vs. Wp Energy Public
Performance |
| Timeline |
| General Motors |
| Wp Energy Public |
GM and Wp Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Wp Energy
The main advantage of trading using opposite GM and Wp Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Wp Energy 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 Wp Energy will offset losses from the drop in Wp Energy's long position.The idea behind General Motors and Wp Energy Public 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.| Wp Energy vs. Workpoint Entertainment Public | Wp Energy vs. WHA Utilities and | Wp Energy vs. Wave Entertainment Public | Wp Energy vs. VGI Public |
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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