Correlation Between GM and Holtek Semiconductor
Can any of the company-specific risk be diversified away by investing in both GM and Holtek Semiconductor 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 Holtek Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Holtek Semiconductor, you can compare the effects of market volatilities on GM and Holtek Semiconductor 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 Holtek Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Holtek Semiconductor.
Diversification Opportunities for GM and Holtek Semiconductor
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Holtek is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Holtek Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holtek Semiconductor 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 Holtek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holtek Semiconductor has no effect on the direction of GM i.e., GM and Holtek Semiconductor go up and down completely randomly.
Pair Corralation between GM and Holtek Semiconductor
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Holtek Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.32 times less risky than Holtek Semiconductor. The stock trades about -0.05 of its potential returns per unit of risk. The Holtek Semiconductor is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,800 in Holtek Semiconductor on November 3, 2024 and sell it today you would earn a total of 30.00 from holding Holtek Semiconductor or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 76.19% |
| Values | Daily Returns |
General Motors vs. Holtek Semiconductor
Performance |
| Timeline |
| General Motors |
| Holtek Semiconductor |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Holtek Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Holtek Semiconductor
The main advantage of trading using opposite GM and Holtek Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Holtek Semiconductor 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 Holtek Semiconductor will offset losses from the drop in Holtek Semiconductor's long position.The idea behind General Motors and Holtek Semiconductor 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.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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