Correlation Between GM and Fidelity Info

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Can any of the company-specific risk be diversified away by investing in both GM and Fidelity Info 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 Fidelity Info into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fidelity Info Tech, you can compare the effects of market volatilities on GM and Fidelity Info 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 Fidelity Info. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fidelity Info.

Diversification Opportunities for GM and Fidelity Info

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between GM and Fidelity is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fidelity Info Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Info Tech 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 Fidelity Info. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Info Tech has no effect on the direction of GM i.e., GM and Fidelity Info go up and down completely randomly.

Pair Corralation between GM and Fidelity Info

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Fidelity Info. In addition to that, GM is 1.34 times more volatile than Fidelity Info Tech. It trades about -0.03 of its total potential returns per unit of risk. Fidelity Info Tech is currently generating about -0.03 per unit of volatility. If you would invest  13,125  in Fidelity Info Tech on September 1, 2022 and sell it today you would lose (2,836)  from holding Fidelity Info Tech or give up 21.61% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Fidelity Info Tech

 Performance (%) 
       Timeline  
General Motors 
GM Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in December 2022.

GM Price Channel

Fidelity Info Tech 
Fidelity Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Info Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Fidelity Info is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Price Channel

GM and Fidelity Info Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Fidelity Info

The main advantage of trading using opposite GM and Fidelity Info positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fidelity Info 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 Fidelity Info will offset losses from the drop in Fidelity Info's long position.
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The idea behind General Motors and Fidelity Info Tech 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.
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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