Correlation Between GM and Sunspring Metal
Can any of the company-specific risk be diversified away by investing in both GM and Sunspring Metal 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 Sunspring Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sunspring Metal Corp, you can compare the effects of market volatilities on GM and Sunspring Metal 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 Sunspring Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sunspring Metal.
Diversification Opportunities for GM and Sunspring Metal
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Sunspring is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sunspring Metal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunspring Metal 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 Sunspring Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunspring Metal Corp has no effect on the direction of GM i.e., GM and Sunspring Metal go up and down completely randomly.
Pair Corralation between GM and Sunspring Metal
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Sunspring Metal. In addition to that, GM is 1.42 times more volatile than Sunspring Metal Corp. It trades about -0.21 of its total potential returns per unit of risk. Sunspring Metal Corp is currently generating about 0.0 per unit of volatility. If you would invest 3,165 in Sunspring Metal Corp on November 22, 2024 and sell it today you would lose (10.00) from holding Sunspring Metal Corp or give up 0.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 71.43% |
| Values | Daily Returns |
General Motors vs. Sunspring Metal Corp
Performance |
| Timeline |
| General Motors |
| Sunspring Metal Corp |
GM and Sunspring Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sunspring Metal
The main advantage of trading using opposite GM and Sunspring Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sunspring Metal 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 Sunspring Metal will offset losses from the drop in Sunspring Metal's long position.The idea behind General Motors and Sunspring Metal 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.| Sunspring Metal vs. Makalot Industrial Co | Sunspring Metal vs. Eternal Materials Co | Sunspring Metal vs. Feng Tay Enterprises | Sunspring Metal vs. Taiwan Fu Hsing |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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