Correlation Between GM and DEUTSCHE BOERSE
Can any of the company-specific risk be diversified away by investing in both GM and DEUTSCHE BOERSE 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 DEUTSCHE BOERSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and DEUTSCHE BOERSE ADR, you can compare the effects of market volatilities on GM and DEUTSCHE BOERSE 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 DEUTSCHE BOERSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and DEUTSCHE BOERSE.
Diversification Opportunities for GM and DEUTSCHE BOERSE
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and DEUTSCHE is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and DEUTSCHE BOERSE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEUTSCHE BOERSE ADR 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 DEUTSCHE BOERSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEUTSCHE BOERSE ADR has no effect on the direction of GM i.e., GM and DEUTSCHE BOERSE go up and down completely randomly.
Pair Corralation between GM and DEUTSCHE BOERSE
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the DEUTSCHE BOERSE. In addition to that, GM is 2.5 times more volatile than DEUTSCHE BOERSE ADR. It trades about -0.14 of its total potential returns per unit of risk. DEUTSCHE BOERSE ADR is currently generating about 0.17 per unit of volatility. If you would invest 2,100 in DEUTSCHE BOERSE ADR on September 13, 2024 and sell it today you would earn a total of 80.00 from holding DEUTSCHE BOERSE ADR or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. DEUTSCHE BOERSE ADR
Performance |
| Timeline |
| General Motors |
| DEUTSCHE BOERSE ADR |
GM and DEUTSCHE BOERSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and DEUTSCHE BOERSE
The main advantage of trading using opposite GM and DEUTSCHE BOERSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, DEUTSCHE BOERSE 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 DEUTSCHE BOERSE will offset losses from the drop in DEUTSCHE BOERSE's long position.The idea behind General Motors and DEUTSCHE BOERSE ADR 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.| DEUTSCHE BOERSE vs. CEOTRONICS | DEUTSCHE BOERSE vs. VULCAN MATERIALS | DEUTSCHE BOERSE vs. NEWELL RUBBERMAID | DEUTSCHE BOERSE vs. Materialise NV |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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