Correlation Between GM and Capital Nasdaq

Can any of the company-specific risk be diversified away by investing in both GM and Capital Nasdaq 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 Capital Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Capital Nasdaq Biotechnology, you can compare the effects of market volatilities on GM and Capital Nasdaq 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 Capital Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Capital Nasdaq.

Diversification Opportunities for GM and Capital Nasdaq

-0.32

Correlation Coefficient

GM  Capital Nasdaq

Very good diversification

The 3 months correlation between GM and Capital is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Capital Nasdaq Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Nasdaq Biote 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 Capital Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Nasdaq Biote has no effect on the direction of GM i.e., GM and Capital Nasdaq go up and down completely randomly.

Pair Corralation between GM and Capital Nasdaq

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.12 times more return on investment than Capital Nasdaq. However, GM is 2.12 times more volatile than Capital Nasdaq Biotechnology. It trades about 0.01 of its potential returns per unit of risk. Capital Nasdaq Biotechnology is currently generating about -0.03 per unit of risk. If you would invest  4,703  in General Motors on December 5, 2024 and sell it today you would earn a total of  35.00  from holding General Motors or generate 0.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.9%
Values	Daily Returns

General Motors  vs.  Capital Nasdaq Biotechnology

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Capital Nasdaq Biote

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Nasdaq Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capital Nasdaq is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Capital Nasdaq

The main advantage of trading using opposite GM and Capital Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Capital Nasdaq 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 Capital Nasdaq will offset losses from the drop in Capital Nasdaq's long position.

The idea behind General Motors and Capital Nasdaq Biotechnology 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.