Correlation Between GM and Great Eastern
Can any of the company-specific risk be diversified away by investing in both GM and Great Eastern 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 Great Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Great Eastern Holdings, you can compare the effects of market volatilities on GM and Great Eastern 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 Great Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Great Eastern.
Diversification Opportunities for GM and Great Eastern
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Great is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Great Eastern Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Eastern Holdings 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 Great Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Eastern Holdings has no effect on the direction of GM i.e., GM and Great Eastern go up and down completely randomly.
Pair Corralation between GM and Great Eastern
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.54 times more return on investment than Great Eastern. However, GM is 2.54 times more volatile than Great Eastern Holdings. It trades about 0.2 of its potential returns per unit of risk. Great Eastern Holdings is currently generating about 0.21 per unit of risk. If you would invest 4,269 in General Motors on February 15, 2024 and sell it today you would earn a total of 255.00 from holding General Motors or generate 5.97% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.65% |
Values | Daily Returns |
General Motors vs. Great Eastern Holdings
Performance |
Timeline |
General Motors |
Great Eastern Holdings |
GM and Great Eastern Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Great Eastern
The main advantage of trading using opposite GM and Great Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Great Eastern 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 Great Eastern will offset losses from the drop in Great Eastern's long position.The idea behind General Motors and Great Eastern Holdings 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.Great Eastern vs. American Equity Investment | Great Eastern vs. American Equity Investment | Great Eastern vs. Atlantic American | Great Eastern vs. CNO Financial Group |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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