Correlation Between GM and Pylon Technologies

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

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

Diversification Opportunities for GM and Pylon Technologies

-0.29

Correlation Coefficient

GM  Pylon Technologies

Very good diversification

The 3 months correlation between GM and Pylon is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Pylon Technologies Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pylon Technologies 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 Pylon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pylon Technologies has no effect on the direction of GM i.e., GM and Pylon Technologies go up and down completely randomly.

Pair Corralation between GM and Pylon Technologies

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Pylon Technologies. In addition to that, GM is 1.12 times more volatile than Pylon Technologies Co. It trades about -0.01 of its total potential returns per unit of risk. Pylon Technologies Co is currently generating about 0.02 per unit of volatility. If you would invest  4,381  in Pylon Technologies Co on December 20, 2024 and sell it today you would earn a total of  66.00  from holding Pylon Technologies Co or generate 1.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

General Motors  vs.  Pylon Technologies Co

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 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.

Pylon Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pylon Technologies Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Pylon Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Pylon Technologies

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

The idea behind General Motors and Pylon Technologies Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.