Correlation Between GM and Bin Chuan
Can any of the company-specific risk be diversified away by investing in both GM and Bin Chuan 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 Bin Chuan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Bin Chuan Enterprise, you can compare the effects of market volatilities on GM and Bin Chuan 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 Bin Chuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Bin Chuan.
Diversification Opportunities for GM and Bin Chuan
Poor diversification
The 3 months correlation between GM and Bin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bin Chuan Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bin Chuan Enterprise 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 Bin Chuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bin Chuan Enterprise has no effect on the direction of GM i.e., GM and Bin Chuan go up and down completely randomly.
Pair Corralation between GM and Bin Chuan
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Bin Chuan. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.59 times less risky than Bin Chuan. The stock trades about -0.15 of its potential returns per unit of risk. The Bin Chuan Enterprise is currently generating about 0.62 of returns per unit of risk over similar time horizon. If you would invest 3,995 in Bin Chuan Enterprise on September 12, 2024 and sell it today you would earn a total of 2,855 from holding Bin Chuan Enterprise or generate 71.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Bin Chuan Enterprise
Performance |
| Timeline |
| General Motors |
| Bin Chuan Enterprise |
GM and Bin Chuan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Bin Chuan
The main advantage of trading using opposite GM and Bin Chuan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Bin Chuan 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 Bin Chuan will offset losses from the drop in Bin Chuan's long position.The idea behind General Motors and Bin Chuan Enterprise 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.| Bin Chuan vs. Catcher Technology Co | Bin Chuan vs. Solar Applied Materials | Bin Chuan vs. Evergreen Steel Corp | Bin Chuan vs. Shin Zu Shing |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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