Correlation Between GM and Lihtai Construction
Can any of the company-specific risk be diversified away by investing in both GM and Lihtai Construction 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 Lihtai Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Lihtai Construction Enterprise, you can compare the effects of market volatilities on GM and Lihtai Construction 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 Lihtai Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Lihtai Construction.
Diversification Opportunities for GM and Lihtai Construction
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Lihtai is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Lihtai Construction Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lihtai Construction 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 Lihtai Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lihtai Construction has no effect on the direction of GM i.e., GM and Lihtai Construction go up and down completely randomly.
Pair Corralation between GM and Lihtai Construction
Allowing for the 90-day total investment horizon General Motors is expected to generate 5.75 times more return on investment than Lihtai Construction. However, GM is 5.75 times more volatile than Lihtai Construction Enterprise. It trades about 0.13 of its potential returns per unit of risk. Lihtai Construction Enterprise is currently generating about 0.12 per unit of risk. If you would invest 5,154 in General Motors on August 30, 2024 and sell it today you would earn a total of 396.00 from holding General Motors or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. Lihtai Construction Enterprise
Performance |
| Timeline |
| General Motors |
| Lihtai Construction |
GM and Lihtai Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Lihtai Construction
The main advantage of trading using opposite GM and Lihtai Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Lihtai Construction 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 Lihtai Construction will offset losses from the drop in Lihtai Construction's long position.The idea behind General Motors and Lihtai Construction Enterprise 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.| Lihtai Construction vs. Hi Lai Foods Co | Lihtai Construction vs. Chung Hwa Food | Lihtai Construction vs. United Radiant Technology | Lihtai Construction vs. Lian Hwa Foods |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |