Correlation Between GM and Bank Ozk
Can any of the company-specific risk be diversified away by investing in both GM and Bank Ozk 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 Bank Ozk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Bank Ozk, you can compare the effects of market volatilities on GM and Bank Ozk 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 Bank Ozk. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Bank Ozk.
Diversification Opportunities for GM and Bank Ozk
Very good diversification
The 3 months correlation between GM and Bank is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bank Ozk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Ozk 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 Bank Ozk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Ozk has no effect on the direction of GM i.e., GM and Bank Ozk go up and down completely randomly.
Pair Corralation between GM and Bank Ozk
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.96 times more return on investment than Bank Ozk. However, General Motors is 1.04 times less risky than Bank Ozk. It trades about -0.01 of its potential returns per unit of risk. Bank Ozk is currently generating about -0.14 per unit of risk. If you would invest 4,950 in General Motors on December 1, 2024 and sell it today you would lose (37.00) from holding General Motors or give up 0.75% 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. Bank Ozk
Performance |
Timeline |
General Motors |
Bank Ozk |
GM and Bank Ozk Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Bank Ozk
The main advantage of trading using opposite GM and Bank Ozk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Bank Ozk 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 Bank Ozk will offset losses from the drop in Bank Ozk's long position.The idea behind General Motors and Bank Ozk 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.Bank Ozk vs. International Bancshares | Bank Ozk vs. Hilltop Holdings | Bank Ozk vs. FB Financial Corp | Bank Ozk vs. Red River Bancshares |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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