Correlation Between GM and Max Zipper

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Can any of the company-specific risk be diversified away by investing in both GM and Max Zipper 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 Max Zipper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Max Zipper Co, you can compare the effects of market volatilities on GM and Max Zipper 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 Max Zipper. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Max Zipper.

Diversification Opportunities for GM and Max Zipper

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between GM and Max is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Max Zipper Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Max Zipper 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 Max Zipper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Max Zipper has no effect on the direction of GM i.e., GM and Max Zipper go up and down completely randomly.

Pair Corralation between GM and Max Zipper

Allowing for the 90-day total investment horizon GM is expected to generate 1.91 times less return on investment than Max Zipper. In addition to that, GM is 1.22 times more volatile than Max Zipper Co. It trades about 0.04 of its total potential returns per unit of risk. Max Zipper Co is currently generating about 0.1 per unit of volatility. If you would invest  8,480  in Max Zipper Co on September 20, 2024 and sell it today you would earn a total of  1,020  from holding Max Zipper Co or generate 12.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Max Zipper Co

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Max Zipper 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Max Zipper Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Max Zipper showed solid returns over the last few months and may actually be approaching a breakup point.

GM and Max Zipper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Max Zipper

The main advantage of trading using opposite GM and Max Zipper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Max Zipper 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 Max Zipper will offset losses from the drop in Max Zipper's long position.
The idea behind General Motors and Max Zipper 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.
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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