Correlation Between GM and Dana Large
Can any of the company-specific risk be diversified away by investing in both GM and Dana Large 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 Dana Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Dana Large Cap, you can compare the effects of market volatilities on GM and Dana Large 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 Dana Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Dana Large.
Diversification Opportunities for GM and Dana Large
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Dana is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Dana Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Large Cap 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 Dana Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Large Cap has no effect on the direction of GM i.e., GM and Dana Large go up and down completely randomly.
Pair Corralation between GM and Dana Large
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.19 times more return on investment than Dana Large. However, GM is 1.19 times more volatile than Dana Large Cap. It trades about 0.06 of its potential returns per unit of risk. Dana Large Cap is currently generating about -0.04 per unit of risk. If you would invest 4,673 in General Motors on September 30, 2024 and sell it today you would earn a total of 755.00 from holding General Motors or generate 16.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
General Motors vs. Dana Large Cap
Performance |
Timeline |
General Motors |
Dana Large Cap |
GM and Dana Large Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Dana Large
The main advantage of trading using opposite GM and Dana Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Dana Large 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 Dana Large will offset losses from the drop in Dana Large's long position.The idea behind General Motors and Dana Large Cap 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.Dana Large vs. Dana Large Cap | Dana Large vs. Dana Small Cap | Dana Large vs. Jpmorgan Hedged Equity | Dana Large vs. Red Oak Technology |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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