Correlation Between GM and Buffalo Early
Can any of the company-specific risk be diversified away by investing in both GM and Buffalo Early 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 Buffalo Early into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Buffalo Early Stage, you can compare the effects of market volatilities on GM and Buffalo Early 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 Buffalo Early. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Buffalo Early.
Diversification Opportunities for GM and Buffalo Early
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Buffalo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Buffalo Early Stage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buffalo Early Stage 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 Buffalo Early. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buffalo Early Stage has no effect on the direction of GM i.e., GM and Buffalo Early go up and down completely randomly.
Pair Corralation between GM and Buffalo Early
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.22 times more return on investment than Buffalo Early. However, GM is 2.22 times more volatile than Buffalo Early Stage. It trades about 0.09 of its potential returns per unit of risk. Buffalo Early Stage is currently generating about 0.12 per unit of risk. If you would invest 4,833 in General Motors on September 4, 2024 and sell it today you would earn a total of 671.00 from holding General Motors or generate 13.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
General Motors vs. Buffalo Early Stage
Performance |
Timeline |
General Motors |
Buffalo Early Stage |
GM and Buffalo Early Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Buffalo Early
The main advantage of trading using opposite GM and Buffalo Early positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Buffalo Early 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 Buffalo Early will offset losses from the drop in Buffalo Early's long position.The idea behind General Motors and Buffalo Early Stage 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.Buffalo Early vs. Buffalo Growth | ||
Buffalo Early vs. Buffalo Small Cap | ||
Buffalo Early vs. Buffalo Emerging Opportunities | ||
Buffalo Early vs. Buffalo Mid Cap |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
Money Managers Screen money managers from public funds and ETFs managed around the world | |
Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |