Correlation Between GENERAL and Mattel

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

By analyzing existing cross correlation between GENERAL ELEC CAP and Mattel Inc, you can compare the effects of market volatilities on GENERAL and Mattel 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 GENERAL with a short position of Mattel. Check out your portfolio center. Please also check ongoing floating volatility patterns of GENERAL and Mattel.

Diversification Opportunities for GENERAL and Mattel

0.58

Correlation Coefficient

GENERAL  Mattel

Very weak diversification

The 3 months correlation between GENERAL and Mattel is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP and Mattel Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mattel Inc and GENERAL 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 ELEC CAP are associated (or correlated) with Mattel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mattel Inc has no effect on the direction of GENERAL i.e., GENERAL and Mattel go up and down completely randomly.

Pair Corralation between GENERAL and Mattel

Assuming the 90 days trading horizon GENERAL ELEC CAP is expected to generate 0.28 times more return on investment than Mattel. However, GENERAL ELEC CAP is 3.58 times less risky than Mattel. It trades about 0.58 of its potential returns per unit of risk. Mattel Inc is currently generating about -0.12 per unit of risk. If you would invest  9,839  in GENERAL ELEC CAP on October 11, 2024 and sell it today you would earn a total of  57.00  from holding GENERAL ELEC CAP or generate 0.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	14.29%
Values	Daily Returns

GENERAL ELEC CAP  vs.  Mattel Inc

GENERAL ELEC CAP

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GENERAL ELEC CAP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, GENERAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Mattel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mattel is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GENERAL and Mattel

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

The idea behind GENERAL ELEC CAP and Mattel 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.