Correlation Between GM and Hood River
Can any of the company-specific risk be diversified away by investing in both GM and Hood River 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 Hood River into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Hood River International, you can compare the effects of market volatilities on GM and Hood River 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 Hood River. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hood River.
Diversification Opportunities for GM and Hood River
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Hood is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hood River International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hood River International 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 Hood River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hood River International has no effect on the direction of GM i.e., GM and Hood River go up and down completely randomly.
Pair Corralation between GM and Hood River
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.56 times more return on investment than Hood River. However, GM is 1.56 times more volatile than Hood River International. It trades about 0.0 of its potential returns per unit of risk. Hood River International is currently generating about -0.07 per unit of risk. If you would invest 4,986 in General Motors on December 18, 2024 and sell it today you would lose (86.00) from holding General Motors or give up 1.72% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
General Motors vs. Hood River International
Performance |
Timeline |
General Motors |
Hood River International |
GM and Hood River Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Hood River
The main advantage of trading using opposite GM and Hood River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Hood River 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 Hood River will offset losses from the drop in Hood River's long position.The idea behind General Motors and Hood River International 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.Hood River vs. Intal High Relative | Hood River vs. Metropolitan West High | Hood River vs. Aqr Alternative Risk | Hood River vs. Ab High Income |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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