Correlation Between GM and Daewoo Engineering
Can any of the company-specific risk be diversified away by investing in both GM and Daewoo Engineering 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 Daewoo Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Daewoo Engineering Construction, you can compare the effects of market volatilities on GM and Daewoo Engineering 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 Daewoo Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Daewoo Engineering.
Diversification Opportunities for GM and Daewoo Engineering
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and Daewoo is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Daewoo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Engineering 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 Daewoo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Engineering has no effect on the direction of GM i.e., GM and Daewoo Engineering go up and down completely randomly.
Pair Corralation between GM and Daewoo Engineering
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.0 times more return on investment than Daewoo Engineering. However, GM is 1.0 times more volatile than Daewoo Engineering Construction. It trades about 0.04 of its potential returns per unit of risk. Daewoo Engineering Construction is currently generating about -0.01 per unit of risk. If you would invest 3,507 in General Motors on November 27, 2024 and sell it today you would earn a total of 1,150 from holding General Motors or generate 32.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.03% |
| Values | Daily Returns |
General Motors vs. Daewoo Engineering Constructio
Performance |
| Timeline |
| General Motors |
| Daewoo Engineering |
GM and Daewoo Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Daewoo Engineering
The main advantage of trading using opposite GM and Daewoo Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Daewoo Engineering 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 Daewoo Engineering will offset losses from the drop in Daewoo Engineering's long position.The idea behind General Motors and Daewoo Engineering Construction 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.| Daewoo Engineering vs. Bookook Steel | Daewoo Engineering vs. Hyundai BNG Steel | Daewoo Engineering vs. GAMEVIL | Daewoo Engineering vs. Netmarble Games Corp |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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