Correlation Between GM and Mobile Appliance
Can any of the company-specific risk be diversified away by investing in both GM and Mobile Appliance 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 Mobile Appliance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Mobile Appliance, you can compare the effects of market volatilities on GM and Mobile Appliance 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 Mobile Appliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mobile Appliance.
Diversification Opportunities for GM and Mobile Appliance
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Mobile is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mobile Appliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mobile Appliance 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 Mobile Appliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mobile Appliance has no effect on the direction of GM i.e., GM and Mobile Appliance go up and down completely randomly.
Pair Corralation between GM and Mobile Appliance
Allowing for the 90-day total investment horizon GM is expected to generate 1.32 times less return on investment than Mobile Appliance. But when comparing it to its historical volatility, General Motors is 1.23 times less risky than Mobile Appliance. It trades about 0.07 of its potential returns per unit of risk. Mobile Appliance is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 215,500 in Mobile Appliance on August 29, 2024 and sell it today you would earn a total of 11,000 from holding Mobile Appliance or generate 5.1% 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. Mobile Appliance
Performance |
| Timeline |
| General Motors |
| Mobile Appliance |
GM and Mobile Appliance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Mobile Appliance
The main advantage of trading using opposite GM and Mobile Appliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Mobile Appliance 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 Mobile Appliance will offset losses from the drop in Mobile Appliance's long position.The idea behind General Motors and Mobile Appliance 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.| Mobile Appliance vs. Automobile Pc | Mobile Appliance vs. Korean Reinsurance Co | Mobile Appliance vs. DSC Investment | Mobile Appliance vs. Stic Investments |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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