Correlation Between GM and Chesapeake Finl
Can any of the company-specific risk be diversified away by investing in both GM and Chesapeake Finl 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 Chesapeake Finl into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Chesapeake Finl Shs, you can compare the effects of market volatilities on GM and Chesapeake Finl 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 Chesapeake Finl. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Chesapeake Finl.
Diversification Opportunities for GM and Chesapeake Finl
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and Chesapeake is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Chesapeake Finl Shs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Finl Shs 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 Chesapeake Finl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Finl Shs has no effect on the direction of GM i.e., GM and Chesapeake Finl go up and down completely randomly.
Pair Corralation between GM and Chesapeake Finl
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Chesapeake Finl. In addition to that, GM is 1.67 times more volatile than Chesapeake Finl Shs. It trades about -0.08 of its total potential returns per unit of risk. Chesapeake Finl Shs is currently generating about 0.02 per unit of volatility. If you would invest 1,900 in Chesapeake Finl Shs on December 5, 2024 and sell it today you would earn a total of 18.00 from holding Chesapeake Finl Shs or generate 0.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 98.31% |
Values | Daily Returns |
General Motors vs. Chesapeake Finl Shs
Performance |
Timeline |
General Motors |
Chesapeake Finl Shs |
GM and Chesapeake Finl Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Chesapeake Finl
The main advantage of trading using opposite GM and Chesapeake Finl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Chesapeake Finl 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 Chesapeake Finl will offset losses from the drop in Chesapeake Finl's long position.The idea behind General Motors and Chesapeake Finl Shs 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.Chesapeake Finl vs. PSB Holdings | Chesapeake Finl vs. Eagle Financial Services | Chesapeake Finl vs. National Capital Bank | Chesapeake Finl vs. Community Heritage Financial |
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.
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