Correlation Between GM and Castles Technology
Can any of the company-specific risk be diversified away by investing in both GM and Castles Technology 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 Castles Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Castles Technology Co, you can compare the effects of market volatilities on GM and Castles Technology 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 Castles Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Castles Technology.
Diversification Opportunities for GM and Castles Technology
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Castles is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Castles Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castles Technology 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 Castles Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castles Technology has no effect on the direction of GM i.e., GM and Castles Technology go up and down completely randomly.
Pair Corralation between GM and Castles Technology
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.84 times more return on investment than Castles Technology. However, General Motors is 1.2 times less risky than Castles Technology. It trades about 0.1 of its potential returns per unit of risk. Castles Technology Co is currently generating about -0.22 per unit of risk. If you would invest 4,563 in General Motors on September 25, 2024 and sell it today you would earn a total of 618.00 from holding General Motors or generate 13.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
General Motors vs. Castles Technology Co
Performance |
Timeline |
General Motors |
Castles Technology |
GM and Castles Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Castles Technology
The main advantage of trading using opposite GM and Castles Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Castles Technology 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 Castles Technology will offset losses from the drop in Castles Technology's long position.The idea behind General Motors and Castles Technology Co 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.Castles Technology vs. Gold Rain Enterprises | Castles Technology vs. Cipherlab Co | Castles Technology vs. Accton Technology Corp | Castles Technology vs. Wah Hong Industrial |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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