Correlation Between GM and Tenaga Nasional
Can any of the company-specific risk be diversified away by investing in both GM and Tenaga Nasional 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 Tenaga Nasional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Tenaga Nasional Bhd, you can compare the effects of market volatilities on GM and Tenaga Nasional 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 Tenaga Nasional. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Tenaga Nasional.
Diversification Opportunities for GM and Tenaga Nasional
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Tenaga is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tenaga Nasional Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaga Nasional 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 Tenaga Nasional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenaga Nasional Bhd has no effect on the direction of GM i.e., GM and Tenaga Nasional go up and down completely randomly.
Pair Corralation between GM and Tenaga Nasional
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.96 times more return on investment than Tenaga Nasional. However, GM is 1.96 times more volatile than Tenaga Nasional Bhd. It trades about 0.07 of its potential returns per unit of risk. Tenaga Nasional Bhd is currently generating about 0.13 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.13% |
| Values | Daily Returns |
General Motors vs. Tenaga Nasional Bhd
Performance |
| Timeline |
| General Motors |
| Tenaga Nasional Bhd |
GM and Tenaga Nasional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Tenaga Nasional
The main advantage of trading using opposite GM and Tenaga Nasional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Tenaga Nasional 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 Tenaga Nasional will offset losses from the drop in Tenaga Nasional's long position.The idea behind General Motors and Tenaga Nasional 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.| Tenaga Nasional vs. Sports Toto Berhad | Tenaga Nasional vs. Lotte Chemical Titan | Tenaga Nasional vs. Mercury Industries Bhd | Tenaga Nasional vs. Media Prima 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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