Correlation Between GM and SS TECH
Can any of the company-specific risk be diversified away by investing in both GM and SS TECH 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 SS TECH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and SS TECH, you can compare the effects of market volatilities on GM and SS TECH 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 SS TECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SS TECH.
Diversification Opportunities for GM and SS TECH
Excellent diversification
The 3 months correlation between GM and 101490 is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SS TECH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SS TECH 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 SS TECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SS TECH has no effect on the direction of GM i.e., GM and SS TECH go up and down completely randomly.
Pair Corralation between GM and SS TECH
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the SS TECH. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.22 times less risky than SS TECH. The stock trades about -0.08 of its potential returns per unit of risk. The SS TECH is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,435,417 in SS TECH on November 7, 2024 and sell it today you would earn a total of 339,583 from holding SS TECH or generate 13.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 92.11% |
| Values | Daily Returns |
General Motors vs. SS TECH
Performance |
| Timeline |
| General Motors |
| SS TECH |
GM and SS TECH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and SS TECH
The main advantage of trading using opposite GM and SS TECH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, SS TECH 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 SS TECH will offset losses from the drop in SS TECH's long position.The idea behind General Motors and SS TECH 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.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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