Correlation Between GM and FGV Holdings
Can any of the company-specific risk be diversified away by investing in both GM and FGV Holdings 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 FGV Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and FGV Holdings Bhd, you can compare the effects of market volatilities on GM and FGV Holdings 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 FGV Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and FGV Holdings.
Diversification Opportunities for GM and FGV Holdings
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and FGV is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and FGV Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FGV Holdings Bhd 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 FGV Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FGV Holdings Bhd has no effect on the direction of GM i.e., GM and FGV Holdings go up and down completely randomly.
Pair Corralation between GM and FGV Holdings
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.16 times more return on investment than FGV Holdings. However, GM is 1.16 times more volatile than FGV Holdings Bhd. It trades about 0.09 of its potential returns per unit of risk. FGV Holdings Bhd is currently generating about -0.02 per unit of risk. If you would invest 3,508 in General Motors on September 12, 2024 and sell it today you would earn a total of 1,766 from holding General Motors or generate 50.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.58% |
| Values | Daily Returns |
General Motors vs. FGV Holdings Bhd
Performance |
| Timeline |
| General Motors |
| FGV Holdings Bhd |
GM and FGV Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and FGV Holdings
The main advantage of trading using opposite GM and FGV Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, FGV Holdings 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 FGV Holdings will offset losses from the drop in FGV Holdings' long position.The idea behind General Motors and FGV Holdings Bhd 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.| FGV Holdings vs. Nestle Bhd | FGV Holdings vs. British American Tobacco | FGV Holdings vs. FARM FRESH BERHAD | FGV Holdings vs. Kawan Food Bhd |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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