Correlation Between GM and National Storage
Can any of the company-specific risk be diversified away by investing in both GM and National Storage 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 National Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and National Storage Affiliates, you can compare the effects of market volatilities on GM and National Storage 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 National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and National Storage.
Diversification Opportunities for GM and National Storage
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and National is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of GM i.e., GM and National Storage go up and down completely randomly.
Pair Corralation between GM and National Storage
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.0 times more return on investment than National Storage. However, GM is 1.0 times more volatile than National Storage Affiliates. It trades about 0.04 of its potential returns per unit of risk. National Storage Affiliates is currently generating about 0.03 per unit of risk. If you would invest 3,787 in General Motors on January 24, 2024 and sell it today you would earn a total of 534.00 from holding General Motors or generate 14.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. National Storage Affiliates
Performance |
| Timeline |
| General Motors |
| National Storage Aff |
GM and National Storage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and National Storage
The main advantage of trading using opposite GM and National Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, National Storage 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 National Storage will offset losses from the drop in National Storage's long position.The idea behind General Motors and National Storage Affiliates 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.| National Storage vs. Extra Space Storage | National Storage vs. Americold Realty Trust | National Storage vs. Public Storage | National Storage vs. Terreno Realty |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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