Correlation Between GM and Jeju Beer
Can any of the company-specific risk be diversified away by investing in both GM and Jeju Beer 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 Jeju Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Jeju Beer Co, you can compare the effects of market volatilities on GM and Jeju Beer 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 Jeju Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Jeju Beer.
Diversification Opportunities for GM and Jeju Beer
Good diversification
The 3 months correlation between GM and Jeju is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Jeju Beer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Beer 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 Jeju Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Beer has no effect on the direction of GM i.e., GM and Jeju Beer go up and down completely randomly.
Pair Corralation between GM and Jeju Beer
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.5 times more return on investment than Jeju Beer. However, General Motors is 2.01 times less risky than Jeju Beer. It trades about 0.05 of its potential returns per unit of risk. Jeju Beer Co is currently generating about -0.02 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,754 from holding General Motors or generate 46.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.58% |
| Values | Daily Returns |
General Motors vs. Jeju Beer Co
Performance |
| Timeline |
| General Motors |
| Jeju Beer |
GM and Jeju Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Jeju Beer
The main advantage of trading using opposite GM and Jeju Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Jeju Beer 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 Jeju Beer will offset losses from the drop in Jeju Beer's long position.| GM vs. GreenPower Motor | GM vs. ZEEKR Intelligent Technology | GM vs. Volcon Inc | GM vs. ECD Automotive Design |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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