Correlation Between GM and NSTS Bancorp

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

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

Diversification Opportunities for GM and NSTS Bancorp

-0.08

Correlation Coefficient

GM  NSTS Bancorp

Good diversification

The 3 months correlation between GM and NSTS is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NSTS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTS Bancorp 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 NSTS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTS Bancorp has no effect on the direction of GM i.e., GM and NSTS Bancorp go up and down completely randomly.

Pair Corralation between GM and NSTS Bancorp

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the NSTS Bancorp. In addition to that, GM is 1.06 times more volatile than NSTS Bancorp. It trades about -0.11 of its total potential returns per unit of risk. NSTS Bancorp is currently generating about 0.0 per unit of volatility. If you would invest  1,135  in NSTS Bancorp on October 16, 2024 and sell it today you would lose (4.00) from holding NSTS Bancorp or give up 0.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  NSTS Bancorp

General Motors

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NSTS Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NSTS Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, NSTS Bancorp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and NSTS Bancorp

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

The idea behind General Motors and NSTS Bancorp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.