Correlation Between GM and Enthusiast Gaming

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

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

Diversification Opportunities for GM and Enthusiast Gaming

0.16

Correlation Coefficient

GM  Enthusiast Gaming

Average diversification

The 3 months correlation between GM and Enthusiast is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Enthusiast Gaming Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enthusiast Gaming 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 Enthusiast Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enthusiast Gaming has no effect on the direction of GM i.e., GM and Enthusiast Gaming go up and down completely randomly.

Pair Corralation between GM and Enthusiast Gaming

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.45 times more return on investment than Enthusiast Gaming. However, General Motors is 2.21 times less risky than Enthusiast Gaming. It trades about 0.12 of its potential returns per unit of risk. Enthusiast Gaming Holdings is currently generating about 0.03 per unit of risk. If you would invest  4,457  in General Motors on September 11, 2024 and sell it today you would earn a total of  817.00  from holding General Motors or generate 18.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Enthusiast Gaming Holdings

General Motors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Enthusiast Gaming

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enthusiast Gaming Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Enthusiast Gaming may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Enthusiast Gaming

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

The idea behind General Motors and Enthusiast Gaming Holdings 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.