Correlation Between GM and Nepes
Can any of the company-specific risk be diversified away by investing in both GM and Nepes 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 Nepes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nepes, you can compare the effects of market volatilities on GM and Nepes 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 Nepes. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nepes.
Diversification Opportunities for GM and Nepes
Very good diversification
The 3 months correlation between GM and Nepes is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nepes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nepes 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 Nepes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nepes has no effect on the direction of GM i.e., GM and Nepes go up and down completely randomly.
Pair Corralation between GM and Nepes
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.6 times more return on investment than Nepes. However, General Motors is 1.67 times less risky than Nepes. It trades about 0.03 of its potential returns per unit of risk. Nepes is currently generating about -0.03 per unit of risk. If you would invest 3,902 in General Motors on November 27, 2024 and sell it today you would earn a total of 755.00 from holding General Motors or generate 19.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.16% |
| Values | Daily Returns |
General Motors vs. Nepes
Performance |
| Timeline |
| General Motors |
| Nepes |
GM and Nepes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nepes
The main advantage of trading using opposite GM and Nepes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nepes 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 Nepes will offset losses from the drop in Nepes' long position.The idea behind General Motors and Nepes 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.| Nepes vs. Dongjin Semichem Co | Nepes vs. SFA Semicon Co | Nepes vs. Seoul Semiconductor Co | Nepes vs. EO Technics 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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