Correlation Between GM and GUOTAI JUNAN
Can any of the company-specific risk be diversified away by investing in both GM and GUOTAI JUNAN 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 GUOTAI JUNAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and GUOTAI JUNAN SEC, you can compare the effects of market volatilities on GM and GUOTAI JUNAN 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 GUOTAI JUNAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and GUOTAI JUNAN.
Diversification Opportunities for GM and GUOTAI JUNAN
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and GUOTAI is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and GUOTAI JUNAN SEC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUOTAI JUNAN SEC 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 GUOTAI JUNAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUOTAI JUNAN SEC has no effect on the direction of GM i.e., GM and GUOTAI JUNAN go up and down completely randomly.
Pair Corralation between GM and GUOTAI JUNAN
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.04 times more return on investment than GUOTAI JUNAN. However, GM is 1.04 times more volatile than GUOTAI JUNAN SEC. It trades about 0.13 of its potential returns per unit of risk. GUOTAI JUNAN SEC is currently generating about 0.06 per unit of risk. If you would invest 5,154 in General Motors on August 30, 2024 and sell it today you would earn a total of 396.00 from holding General Motors or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. GUOTAI JUNAN SEC
Performance |
| Timeline |
| General Motors |
| GUOTAI JUNAN SEC |
GM and GUOTAI JUNAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and GUOTAI JUNAN
The main advantage of trading using opposite GM and GUOTAI JUNAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, GUOTAI JUNAN 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 GUOTAI JUNAN will offset losses from the drop in GUOTAI JUNAN's long position.The idea behind General Motors and GUOTAI JUNAN SEC 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.| GUOTAI JUNAN vs. Macquarie Group Limited | GUOTAI JUNAN vs. MSCI Inc | GUOTAI JUNAN vs. Superior Plus Corp | GUOTAI JUNAN vs. NMI Holdings |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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