Correlation Between GM and PagerDuty

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

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

Diversification Opportunities for GM and PagerDuty

0.72

Correlation Coefficient

GM  PagerDuty

Poor diversification

The 3 months correlation between GM and PagerDuty is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and PagerDuty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PagerDuty 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 PagerDuty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PagerDuty has no effect on the direction of GM i.e., GM and PagerDuty go up and down completely randomly.

Pair Corralation between GM and PagerDuty

Allowing for the 90-day total investment horizon GM is expected to generate 1.04 times less return on investment than PagerDuty. In addition to that, GM is 1.09 times more volatile than PagerDuty. It trades about 0.06 of its total potential returns per unit of risk. PagerDuty is currently generating about 0.07 per unit of volatility. If you would invest  1,633  in PagerDuty on September 23, 2024 and sell it today you would earn a total of  147.00  from holding PagerDuty or generate 9.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

General Motors  vs.  PagerDuty

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PagerDuty

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PagerDuty are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PagerDuty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and PagerDuty

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

The idea behind General Motors and PagerDuty 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 Stocks Directory module to find actively traded stocks across global markets.