Correlation Between GM and Golden Bridge
Can any of the company-specific risk be diversified away by investing in both GM and Golden Bridge 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 Golden Bridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Golden Bridge Investment, you can compare the effects of market volatilities on GM and Golden Bridge 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 Golden Bridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Golden Bridge.
Diversification Opportunities for GM and Golden Bridge
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Golden is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Golden Bridge Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Bridge Investment 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 Golden Bridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Bridge Investment has no effect on the direction of GM i.e., GM and Golden Bridge go up and down completely randomly.
Pair Corralation between GM and Golden Bridge
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.88 times more return on investment than Golden Bridge. However, GM is 1.88 times more volatile than Golden Bridge Investment. It trades about 0.07 of its potential returns per unit of risk. Golden Bridge Investment is currently generating about -0.23 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% 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. Golden Bridge Investment
Performance |
| Timeline |
| General Motors |
| Golden Bridge Investment |
GM and Golden Bridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Golden Bridge
The main advantage of trading using opposite GM and Golden Bridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Golden Bridge 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 Golden Bridge will offset losses from the drop in Golden Bridge's long position.The idea behind General Motors and Golden Bridge Investment 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.| Golden Bridge vs. LB Investment | Golden Bridge vs. Samyang Foods Co | Golden Bridge vs. Dongwon Metal Co | Golden Bridge vs. Daiyang Metal Co |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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