Correlation Between GM and Nicholas Fund

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

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

Diversification Opportunities for GM and Nicholas Fund

0.54

Correlation Coefficient

GM  Nicholas Fund

Very weak diversification

The 3 months correlation between GM and Nicholas is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nicholas Fund Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Fund 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 Nicholas Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Fund has no effect on the direction of GM i.e., GM and Nicholas Fund go up and down completely randomly.

Pair Corralation between GM and Nicholas Fund

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.45 times more return on investment than Nicholas Fund. However, GM is 2.45 times more volatile than Nicholas Fund Inc. It trades about 0.05 of its potential returns per unit of risk. Nicholas Fund Inc is currently generating about 0.01 per unit of risk. If you would invest  4,604  in General Motors on October 7, 2024 and sell it today you would earn a total of  573.00  from holding General Motors or generate 12.45% 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.  Nicholas Fund Inc

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Nicholas Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nicholas Fund Inc has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nicholas Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Nicholas Fund

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

The idea behind General Motors and Nicholas Fund Inc 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.