Correlation Between GM and Thunder Software

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

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

Diversification Opportunities for GM and Thunder Software

0.05

Correlation Coefficient

GM  Thunder Software

Significant diversification

The 3 months correlation between GM and Thunder is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Thunder Software Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunder Software Tec 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 Thunder Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunder Software Tec has no effect on the direction of GM i.e., GM and Thunder Software go up and down completely randomly.

Pair Corralation between GM and Thunder Software

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.34 times more return on investment than Thunder Software. However, General Motors is 2.98 times less risky than Thunder Software. It trades about -0.05 of its potential returns per unit of risk. Thunder Software Technology is currently generating about -0.07 per unit of risk. If you would invest  5,271  in General Motors on October 8, 2024 and sell it today you would lose (94.00) from holding General Motors or give up 1.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Thunder Software Technology

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Thunder Software Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thunder Software Technology 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 Thunder Software

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

The idea behind General Motors and Thunder Software Technology 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.