Correlation Between GM and China Railway
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By analyzing existing cross correlation between General Motors and China Railway Construction, you can compare the effects of market volatilities on GM and China Railway 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 China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and China Railway.
Diversification Opportunities for GM and China Railway
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and China is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and China Railway Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Constr 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 China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Constr has no effect on the direction of GM i.e., GM and China Railway go up and down completely randomly.
Pair Corralation between GM and China Railway
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.92 times more return on investment than China Railway. However, General Motors is 1.09 times less risky than China Railway. It trades about 0.15 of its potential returns per unit of risk. China Railway Construction is currently generating about 0.05 per unit of risk. If you would invest 2,858 in General Motors on August 24, 2024 and sell it today you would earn a total of 2,990 from holding General Motors or generate 104.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.6% |
| Values | Daily Returns |
General Motors vs. China Railway Construction
Performance |
| Timeline |
| General Motors |
| China Railway Constr |
GM and China Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and China Railway
The main advantage of trading using opposite GM and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, China Railway 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 China Railway will offset losses from the drop in China Railway's long position.The idea behind General Motors and China Railway Construction 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.| China Railway vs. Jilin Jlu Communication | China Railway vs. Xiangyang Automobile Bearing | China Railway vs. Xinjiang Beixin RoadBridge | China Railway vs. Sinomach Automobile Co |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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