Correlation Between GM and Hey Song
Can any of the company-specific risk be diversified away by investing in both GM and Hey Song 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 Hey Song into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Hey Song Corp, you can compare the effects of market volatilities on GM and Hey Song 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 Hey Song. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hey Song.
Diversification Opportunities for GM and Hey Song
Very good diversification
The 3 months correlation between GM and Hey is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hey Song Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hey Song Corp 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 Hey Song. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hey Song Corp has no effect on the direction of GM i.e., GM and Hey Song go up and down completely randomly.
Pair Corralation between GM and Hey Song
Allowing for the 90-day total investment horizon General Motors is expected to generate 6.56 times more return on investment than Hey Song. However, GM is 6.56 times more volatile than Hey Song Corp. It trades about 0.16 of its potential returns per unit of risk. Hey Song Corp is currently generating about 0.0 per unit of risk. If you would invest 5,096 in General Motors on September 2, 2024 and sell it today you would earn a total of 463.00 from holding General Motors or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Hey Song Corp
Performance |
| Timeline |
| General Motors |
| Hey Song Corp |
GM and Hey Song Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Hey Song
The main advantage of trading using opposite GM and Hey Song positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Hey Song 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 Hey Song will offset losses from the drop in Hey Song's long position.The idea behind General Motors and Hey Song Corp 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.| Hey Song vs. Great Wall Enterprise | Hey Song vs. Uni President Enterprises Corp | Hey Song vs. Wei Chuan Foods | Hey Song vs. Taisun Enterprise 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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