Correlation Between Blue Bird and GM
Can any of the company-specific risk be diversified away by investing in both Blue Bird and GM 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 Blue Bird and GM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Bird Corp and General Motors, you can compare the effects of market volatilities on Blue Bird and GM 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 Blue Bird with a short position of GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Bird and GM.
Diversification Opportunities for Blue Bird and GM
Almost no diversification
The 3 months correlation between Blue and GM is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Blue Bird Corp and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Blue Bird 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 Blue Bird Corp are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Blue Bird i.e., Blue Bird and GM go up and down completely randomly.
Pair Corralation between Blue Bird and GM
Given the investment horizon of 90 days Blue Bird Corp is expected to generate 2.11 times more return on investment than GM. However, Blue Bird is 2.11 times more volatile than General Motors. It trades about 0.08 of its potential returns per unit of risk. General Motors is currently generating about 0.07 per unit of risk. If you would invest 1,806 in Blue Bird Corp on January 20, 2024 and sell it today you would earn a total of 1,556 from holding Blue Bird Corp or generate 86.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Bird Corp vs. General Motors
Performance |
| Timeline |
| Blue Bird Corp |
| General Motors |
Blue Bird and GM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Bird and GM
The main advantage of trading using opposite Blue Bird and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Bird position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.| Blue Bird vs. Vicinity Motor Corp | Blue Bird vs. AYRO Inc | Blue Bird vs. Canoo Inc | Blue Bird vs. Hyzon Motors |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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