Correlation Between GM and Hengli Industrial
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By analyzing existing cross correlation between General Motors and Hengli Industrial Development, you can compare the effects of market volatilities on GM and Hengli Industrial 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 Hengli Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hengli Industrial.
Diversification Opportunities for GM and Hengli Industrial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Hengli is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hengli Industrial Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengli Industrial 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 Hengli Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengli Industrial has no effect on the direction of GM i.e., GM and Hengli Industrial go up and down completely randomly.
Pair Corralation between GM and Hengli Industrial
Allowing for the 90-day total investment horizon GM is expected to generate 2.49 times less return on investment than Hengli Industrial. But when comparing it to its historical volatility, General Motors is 1.49 times less risky than Hengli Industrial. It trades about 0.17 of its potential returns per unit of risk. Hengli Industrial Development is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 181.00 in Hengli Industrial Development on September 1, 2024 and sell it today you would earn a total of 49.00 from holding Hengli Industrial Development or generate 27.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Hengli Industrial Development
Performance |
| Timeline |
| General Motors |
| Hengli Industrial |
GM and Hengli Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Hengli Industrial
The main advantage of trading using opposite GM and Hengli Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Hengli Industrial 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 Hengli Industrial will offset losses from the drop in Hengli Industrial's long position.The idea behind General Motors and Hengli Industrial Development 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.| Hengli Industrial vs. Shenzhen Centralcon Investment | Hengli Industrial vs. Guangzhou Zhujiang Brewery | Hengli Industrial vs. Beijing Mainstreets Investment | Hengli Industrial vs. Tongyu Communication |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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