Correlation Between GM and Nice
Can any of the company-specific risk be diversified away by investing in both GM and Nice 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 Nice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nice, you can compare the effects of market volatilities on GM and Nice 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 Nice. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nice.
Diversification Opportunities for GM and Nice
Very weak diversification
The 3 months correlation between GM and Nice is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nice 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 Nice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nice has no effect on the direction of GM i.e., GM and Nice go up and down completely randomly.
Pair Corralation between GM and Nice
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.68 times more return on investment than Nice. However, General Motors is 1.47 times less risky than Nice. It trades about 0.19 of its potential returns per unit of risk. Nice is currently generating about 0.08 per unit of risk. If you would invest 3,522 in General Motors on January 20, 2024 and sell it today you would earn a total of 722.00 from holding General Motors or generate 20.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 82.54% |
| Values | Daily Returns |
General Motors vs. Nice
Performance |
| Timeline |
| General Motors |
| Nice |
GM and Nice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nice
The main advantage of trading using opposite GM and Nice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nice 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 Nice will offset losses from the drop in Nice's long position.The idea behind General Motors and Nice 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.| Nice vs. Elbit Systems | Nice vs. Tower Semiconductor | Nice vs. Bank Leumi Le Israel | Nice vs. Teva Pharmaceutical Industries |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |