This module allows you to analyze existing cross correlation between General Motors Company and Facebook. You can compare the effects of market volatilities on GM and Facebook 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 Facebook. See also your portfolio center. Please also check ongoing floating volatility patterns of GM and Facebook.
Allowing for the 30-days total investment horizon, General Motors Company is expected to under-perform the Facebook. But the stock apears to be less risky and, when comparing its historical volatility, General Motors Company is 1.27 times less risky than Facebook. The stock trades about -0.3 of its potential returns per unit of risk. The Facebook is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest 17,746 in Facebook on August 26, 2018 and sell it today you would lose (1,205) from holding Facebook or give up 6.79% of portfolio value over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding General Motors Company and Facebook Inc in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Facebook 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 Company are associated (or correlated) with Facebook. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Facebook has no effect on the direction of GM i.e. GM and Facebook go up and down completely randomly.
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