Correlation Between GM and Global Power
Can any of the company-specific risk be diversified away by investing in both GM and Global Power 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 Global Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Global Power Equipment, you can compare the effects of market volatilities on GM and Global Power 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 Global Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Global Power.
Diversification Opportunities for GM and Global Power
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Global is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Global Power Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Power Equipment 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 Global Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Power Equipment has no effect on the direction of GM i.e., GM and Global Power go up and down completely randomly.
Pair Corralation between GM and Global Power
If you would invest 4,400 in General Motors on January 26, 2024 and sell it today you would earn a total of 108.00 from holding General Motors or generate 2.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
General Motors vs. Global Power Equipment
Performance |
| Timeline |
| General Motors |
| Global Power Equipment |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Global Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Global Power
The main advantage of trading using opposite GM and Global Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Global Power 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 Global Power will offset losses from the drop in Global Power's long position.The idea behind General Motors and Global Power Equipment 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.| Global Power vs. Dow Inc | Global Power vs. The Mosaic | Global Power vs. Hawkins | Global Power vs. Skechers USA |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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