Correlation Between GM and HMCIB SPAC

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

By analyzing existing cross correlation between General Motors and HMCIB SPAC 3, you can compare the effects of market volatilities on GM and HMCIB SPAC 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 HMCIB SPAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and HMCIB SPAC.

Diversification Opportunities for GM and HMCIB SPAC

-0.08

Correlation Coefficient

GM  HMCIB SPAC

Good diversification

The 3 months correlation between GM and HMCIB is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and HMCIB SPAC 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMCIB SPAC 3 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 HMCIB SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMCIB SPAC 3 has no effect on the direction of GM i.e., GM and HMCIB SPAC go up and down completely randomly.

Pair Corralation between GM and HMCIB SPAC

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the HMCIB SPAC. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.49 times less risky than HMCIB SPAC. The stock trades about -0.08 of its potential returns per unit of risk. The HMCIB SPAC 3 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  132,700  in HMCIB SPAC 3 on October 22, 2024 and sell it today you would earn a total of  13,100  from holding HMCIB SPAC 3 or generate 9.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.5%
Values	Daily Returns

General Motors  vs.  HMCIB SPAC 3

General Motors

Risk-Adjusted Performance

0 of 100

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 very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

HMCIB SPAC 3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMCIB SPAC 3 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with GM and HMCIB SPAC

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

The idea behind General Motors and HMCIB SPAC 3 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.