Correlation Between GM and Davicom Semiconductor
Can any of the company-specific risk be diversified away by investing in both GM and Davicom Semiconductor 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 Davicom Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Davicom Semiconductor, you can compare the effects of market volatilities on GM and Davicom Semiconductor 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 Davicom Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Davicom Semiconductor.
Diversification Opportunities for GM and Davicom Semiconductor
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Davicom is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Davicom Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davicom Semiconductor 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 Davicom Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davicom Semiconductor has no effect on the direction of GM i.e., GM and Davicom Semiconductor go up and down completely randomly.
Pair Corralation between GM and Davicom Semiconductor
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.79 times more return on investment than Davicom Semiconductor. However, General Motors is 1.26 times less risky than Davicom Semiconductor. It trades about 0.05 of its potential returns per unit of risk. Davicom Semiconductor 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 | Very Weak |
| Accuracy | 96.97% |
| Values | Daily Returns |
General Motors vs. Davicom Semiconductor
Performance |
| Timeline |
| General Motors |
| Davicom Semiconductor |
GM and Davicom Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Davicom Semiconductor
The main advantage of trading using opposite GM and Davicom Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Davicom Semiconductor 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 Davicom Semiconductor will offset losses from the drop in Davicom Semiconductor's long position.The idea behind General Motors and Davicom Semiconductor 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.| Davicom Semiconductor vs. Taiwan Semiconductor Manufacturing | Davicom Semiconductor vs. Yang Ming Marine | Davicom Semiconductor vs. ASE Industrial Holding | Davicom Semiconductor vs. AU Optronics |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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