Correlation Between GM and China Glaze
Can any of the company-specific risk be diversified away by investing in both GM and China Glaze 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 China Glaze into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and China Glaze Co, you can compare the effects of market volatilities on GM and China Glaze 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 China Glaze. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and China Glaze.
Diversification Opportunities for GM and China Glaze
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and China is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and China Glaze Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Glaze 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 China Glaze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Glaze has no effect on the direction of GM i.e., GM and China Glaze go up and down completely randomly.
Pair Corralation between GM and China Glaze
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the China Glaze. In addition to that, GM is 2.08 times more volatile than China Glaze Co. It trades about -0.06 of its total potential returns per unit of risk. China Glaze Co is currently generating about 0.04 per unit of volatility. If you would invest 1,895 in China Glaze Co on November 4, 2024 and sell it today you would earn a total of 15.00 from holding China Glaze Co or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 75.0% |
| Values | Daily Returns |
General Motors vs. China Glaze Co
Performance |
| Timeline |
| General Motors |
| China Glaze |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and China Glaze Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and China Glaze
The main advantage of trading using opposite GM and China Glaze positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, China Glaze 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 China Glaze will offset losses from the drop in China Glaze's long position.The idea behind General Motors and China Glaze Co 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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