Correlation Between GM and Norion Bank
Can any of the company-specific risk be diversified away by investing in both GM and Norion 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 Norion 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 Norion Bank, you can compare the effects of market volatilities on GM and Norion 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 Norion Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Norion Bank.
Diversification Opportunities for GM and Norion Bank
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Norion is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Norion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norion 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 Norion Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norion Bank has no effect on the direction of GM i.e., GM and Norion Bank go up and down completely randomly.
Pair Corralation between GM and Norion Bank
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.21 times more return on investment than Norion Bank. However, GM is 1.21 times more volatile than Norion Bank. It trades about 0.09 of its potential returns per unit of risk. Norion Bank is currently generating about 0.0 per unit of risk. If you would invest 4,602 in General Motors on September 12, 2024 and sell it today you would earn a total of 602.00 from holding General Motors or generate 13.08% 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. Norion Bank
Performance |
Timeline |
General Motors |
Norion Bank |
GM and Norion Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Norion Bank
The main advantage of trading using opposite GM and Norion Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Norion 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 Norion Bank will offset losses from the drop in Norion Bank's long position.The idea behind General Motors and Norion 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.Norion Bank vs. AstraZeneca PLC | Norion Bank vs. Investor AB ser | Norion Bank vs. Investor AB ser | Norion Bank vs. Atlas Copco AB |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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