Correlation Between GM and SOL IHS
Can any of the company-specific risk be diversified away by investing in both GM and SOL IHS 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 SOL IHS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and SOL IHS Markit, you can compare the effects of market volatilities on GM and SOL IHS 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 SOL IHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SOL IHS.
Diversification Opportunities for GM and SOL IHS
Significant diversification
The 3 months correlation between GM and SOL is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SOL IHS Markit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOL IHS Markit 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 SOL IHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOL IHS Markit has no effect on the direction of GM i.e., GM and SOL IHS go up and down completely randomly.
Pair Corralation between GM and SOL IHS
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.86 times more return on investment than SOL IHS. However, GM is 1.86 times more volatile than SOL IHS Markit. It trades about 0.07 of its potential returns per unit of risk. SOL IHS Markit is currently generating about 0.12 per unit of risk. If you would invest 5,256 in General Motors on October 24, 2024 and sell it today you would earn a total of 133.00 from holding General Motors or generate 2.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.0% |
| Values | Daily Returns |
General Motors vs. SOL IHS Markit
Performance |
| Timeline |
| General Motors |
| SOL IHS Markit |
GM and SOL IHS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and SOL IHS
The main advantage of trading using opposite GM and SOL IHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, SOL IHS 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 SOL IHS will offset losses from the drop in SOL IHS's long position.The idea behind General Motors and SOL IHS Markit 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.| SOL IHS vs. SOL KRX Climate | SOL IHS vs. SOL K Global Semiconductor | SOL IHS vs. SOL TOP5 Blended | SOL IHS vs. SOL SP500ESG |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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