Correlation Between GM and Optivision Technology
Can any of the company-specific risk be diversified away by investing in both GM and Optivision Technology 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 Optivision Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Optivision Technology, you can compare the effects of market volatilities on GM and Optivision Technology 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 Optivision Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Optivision Technology.
Diversification Opportunities for GM and Optivision Technology
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Optivision is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Optivision Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optivision Technology 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 Optivision Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optivision Technology has no effect on the direction of GM i.e., GM and Optivision Technology go up and down completely randomly.
Pair Corralation between GM and Optivision Technology
Allowing for the 90-day total investment horizon GM is expected to generate 1.39 times less return on investment than Optivision Technology. But when comparing it to its historical volatility, General Motors is 1.39 times less risky than Optivision Technology. It trades about 0.05 of its potential returns per unit of risk. Optivision Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,920 in Optivision Technology on September 3, 2024 and sell it today you would earn a total of 1,120 from holding Optivision Technology or generate 58.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.97% |
| Values | Daily Returns |
General Motors vs. Optivision Technology
Performance |
| Timeline |
| General Motors |
| Optivision Technology |
GM and Optivision Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Optivision Technology
The main advantage of trading using opposite GM and Optivision Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Optivision Technology 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 Optivision Technology will offset losses from the drop in Optivision Technology's long position.The idea behind General Motors and Optivision Technology 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.| Optivision Technology vs. Chung Hwa Food | Optivision Technology vs. Tehmag Foods | Optivision Technology vs. Standard Foods Corp | Optivision Technology vs. Hannstar Display Corp |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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