Correlation Between GM and Hong Yi
Can any of the company-specific risk be diversified away by investing in both GM and Hong Yi 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 Hong Yi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Hong Yi Fiber, you can compare the effects of market volatilities on GM and Hong Yi 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 Hong Yi. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hong Yi.
Diversification Opportunities for GM and Hong Yi
Very weak diversification
The 3 months correlation between GM and Hong is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hong Yi Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Yi Fiber 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 Hong Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Yi Fiber has no effect on the direction of GM i.e., GM and Hong Yi go up and down completely randomly.
Pair Corralation between GM and Hong Yi
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Hong Yi. In addition to that, GM is 3.38 times more volatile than Hong Yi Fiber. It trades about -0.1 of its total potential returns per unit of risk. Hong Yi Fiber is currently generating about -0.1 per unit of volatility. If you would invest 1,515 in Hong Yi Fiber on January 5, 2025 and sell it today you would lose (25.00) from holding Hong Yi Fiber or give up 1.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Hong Yi Fiber
Performance |
| Timeline |
| General Motors |
| Hong Yi Fiber |
GM and Hong Yi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Hong Yi
The main advantage of trading using opposite GM and Hong Yi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Hong Yi 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 Hong Yi will offset losses from the drop in Hong Yi's long position.The idea behind General Motors and Hong Yi Fiber 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.| Hong Yi vs. Tainan Enterprises Co | Hong Yi vs. De Licacy Industrial | Hong Yi vs. Nien Hsing Textile | Hong Yi vs. Wisher Industrial 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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