Correlation Between GM and Merry Electronics
Can any of the company-specific risk be diversified away by investing in both GM and Merry Electronics 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 Merry Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Merry Electronics Co, you can compare the effects of market volatilities on GM and Merry Electronics 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 Merry Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Merry Electronics.
Diversification Opportunities for GM and Merry Electronics
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Merry is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Merry Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merry Electronics 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 Merry Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merry Electronics has no effect on the direction of GM i.e., GM and Merry Electronics go up and down completely randomly.
Pair Corralation between GM and Merry Electronics
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.97 times more return on investment than Merry Electronics. However, General Motors is 1.03 times less risky than Merry Electronics. It trades about 0.08 of its potential returns per unit of risk. Merry Electronics Co is currently generating about 0.04 per unit of risk. If you would invest 3,688 in General Motors on August 26, 2024 and sell it today you would earn a total of 2,165 from holding General Motors or generate 58.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.9% |
| Values | Daily Returns |
General Motors vs. Merry Electronics Co
Performance |
| Timeline |
| General Motors |
| Merry Electronics |
GM and Merry Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Merry Electronics
The main advantage of trading using opposite GM and Merry Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Merry Electronics 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 Merry Electronics will offset losses from the drop in Merry Electronics' long position.The idea behind General Motors and Merry Electronics 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.| Merry Electronics vs. Hunya Foods Co | Merry Electronics vs. Cathay Financial Holding | Merry Electronics vs. Asustek Computer | Merry Electronics vs. Taiwan Cooperative Financial |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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