Correlation Between GM and Shin Kong
Can any of the company-specific risk be diversified away by investing in both GM and Shin Kong 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 Shin Kong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Shin Kong Financial, you can compare the effects of market volatilities on GM and Shin Kong 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 Shin Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Shin Kong.
Diversification Opportunities for GM and Shin Kong
Excellent diversification
The 3 months correlation between GM and Shin is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Shin Kong Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Kong Financial 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 Shin Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Kong Financial has no effect on the direction of GM i.e., GM and Shin Kong go up and down completely randomly.
Pair Corralation between GM and Shin Kong
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.34 times more return on investment than Shin Kong. However, GM is 3.34 times more volatile than Shin Kong Financial. It trades about 0.32 of its potential returns per unit of risk. Shin Kong Financial is currently generating about 0.24 per unit of risk. If you would invest 5,273 in General Motors on August 28, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Shin Kong Financial
Performance |
| Timeline |
| General Motors |
| Shin Kong Financial |
GM and Shin Kong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Shin Kong
The main advantage of trading using opposite GM and Shin Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Shin Kong 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 Shin Kong will offset losses from the drop in Shin Kong's long position.The idea behind General Motors and Shin Kong Financial 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.| Shin Kong vs. Cathay Financial Holding | Shin Kong vs. Taishin Financial Holding | Shin Kong vs. Fubon Financial Holding | Shin Kong vs. CTBC Financial Holding |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |