Correlation Between GM and Eventbrite

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

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

Diversification Opportunities for GM and Eventbrite

0.82

Correlation Coefficient

GM  Eventbrite

Very poor diversification

The 3 months correlation between GM and Eventbrite is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Eventbrite Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventbrite Class A 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 Eventbrite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventbrite Class A has no effect on the direction of GM i.e., GM and Eventbrite go up and down completely randomly.

Pair Corralation between GM and Eventbrite

Allowing for the 90-day total investment horizon GM is expected to generate 1.83 times less return on investment than Eventbrite. In addition to that, GM is 1.03 times more volatile than Eventbrite Class A. It trades about 0.13 of its total potential returns per unit of risk. Eventbrite Class A is currently generating about 0.25 per unit of volatility. If you would invest  321.00  in Eventbrite Class A on August 30, 2024 and sell it today you would earn a total of  47.00  from holding Eventbrite Class A or generate 14.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

General Motors  vs.  Eventbrite Class A

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Eventbrite Class A

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eventbrite Class A are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Eventbrite sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Eventbrite

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

The idea behind General Motors and Eventbrite Class A 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.