Correlation Between GM and ISU Chemical
Can any of the company-specific risk be diversified away by investing in both GM and ISU Chemical 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 ISU Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and ISU Chemical Co, you can compare the effects of market volatilities on GM and ISU Chemical 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 ISU Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and ISU Chemical.
Diversification Opportunities for GM and ISU Chemical
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and ISU is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ISU Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISU Chemical 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 ISU Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISU Chemical has no effect on the direction of GM i.e., GM and ISU Chemical go up and down completely randomly.
Pair Corralation between GM and ISU Chemical
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the ISU Chemical. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.19 times less risky than ISU Chemical. The stock trades about -0.09 of its potential returns per unit of risk. The ISU Chemical Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 599,000 in ISU Chemical Co on October 7, 2024 and sell it today you would earn a total of 27,000 from holding ISU Chemical Co or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
General Motors vs. ISU Chemical Co
Performance |
| Timeline |
| General Motors |
| ISU Chemical |
GM and ISU Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and ISU Chemical
The main advantage of trading using opposite GM and ISU Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, ISU Chemical 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 ISU Chemical will offset losses from the drop in ISU Chemical's long position.The idea behind General Motors and ISU Chemical Co 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.| ISU Chemical vs. AptaBio Therapeutics | ISU Chemical vs. Daewoo SBI SPAC | ISU Chemical vs. Dream Security co | ISU Chemical vs. Microfriend |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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