Correlation Between GM and CG Hi
Can any of the company-specific risk be diversified away by investing in both GM and CG Hi 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 CG Hi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and CG Hi Tech, you can compare the effects of market volatilities on GM and CG Hi 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 CG Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and CG Hi.
Diversification Opportunities for GM and CG Hi
Good diversification
The 3 months correlation between GM and 264660 is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CG Hi Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CG Hi Tech 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 CG Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CG Hi Tech has no effect on the direction of GM i.e., GM and CG Hi go up and down completely randomly.
Pair Corralation between GM and CG Hi
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.82 times more return on investment than CG Hi. However, General Motors is 1.22 times less risky than CG Hi. It trades about 0.04 of its potential returns per unit of risk. CG Hi Tech is currently generating about 0.02 per unit of risk. If you would invest 4,028 in General Motors on October 25, 2024 and sell it today you would earn a total of 1,394 from holding General Motors or generate 34.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.77% |
| Values | Daily Returns |
General Motors vs. CG Hi Tech
Performance |
| Timeline |
| General Motors |
| CG Hi Tech |
GM and CG Hi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and CG Hi
The main advantage of trading using opposite GM and CG Hi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, CG Hi 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 CG Hi will offset losses from the drop in CG Hi's long position.The idea behind General Motors and CG Hi Tech 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.| CG Hi vs. EV Advanced Material | CG Hi vs. Lotte Data Communication | CG Hi vs. INNOX Advanced Materials | CG Hi vs. RF Materials Co |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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