Correlation Between GM and Community Bank
Can any of the company-specific risk be diversified away by investing in both GM and Community Bank 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 Community Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Community Bank, you can compare the effects of market volatilities on GM and Community Bank 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 Community Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Community Bank.
Diversification Opportunities for GM and Community Bank
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Community is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Community Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank 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 Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank has no effect on the direction of GM i.e., GM and Community Bank go up and down completely randomly.
Pair Corralation between GM and Community Bank
If you would invest 1,395 in Community Bank on September 25, 2024 and sell it today you would earn a total of 0.00 from holding Community Bank or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 5.0% |
Values | Daily Returns |
General Motors vs. Community Bank
Performance |
Timeline |
General Motors |
Community Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
GM and Community Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Community Bank
The main advantage of trading using opposite GM and Community Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Community Bank 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 Community Bank will offset losses from the drop in Community Bank's long position.The idea behind General Motors and Community Bank 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.Community Bank vs. MF Bancorp | Community Bank vs. Merchants Marine Bancorp | Community Bank vs. MNB Holdings Corp | Community Bank vs. United Bancorporation of |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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