Correlation Between GM and Memecoin

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

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

Diversification Opportunities for GM and Memecoin

0.68

Correlation Coefficient

GM  Memecoin

Poor diversification

The 3 months correlation between GM and Memecoin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Memecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Memecoin 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 Memecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Memecoin has no effect on the direction of GM i.e., GM and Memecoin go up and down completely randomly.

Pair Corralation between GM and Memecoin

Allowing for the 90-day total investment horizon GM is expected to generate 4.4 times less return on investment than Memecoin. But when comparing it to its historical volatility, General Motors is 2.94 times less risky than Memecoin. It trades about 0.16 of its potential returns per unit of risk. Memecoin is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1.11  in Memecoin on September 2, 2024 and sell it today you would earn a total of  0.50  from holding Memecoin or generate 45.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Memecoin

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Memecoin

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Memecoin are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Memecoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Memecoin

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

The idea behind General Motors and Memecoin 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.