Correlation Between GM and EQT AB
Can any of the company-specific risk be diversified away by investing in both GM and EQT AB 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 EQT AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and EQT AB, you can compare the effects of market volatilities on GM and EQT AB 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 EQT AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and EQT AB.
Diversification Opportunities for GM and EQT AB
Good diversification
The 3 months correlation between GM and EQT is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and EQT AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT AB 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 EQT AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT AB has no effect on the direction of GM i.e., GM and EQT AB go up and down completely randomly.
Pair Corralation between GM and EQT AB
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the EQT AB. In addition to that, GM is 1.15 times more volatile than EQT AB. It trades about -0.1 of its total potential returns per unit of risk. EQT AB is currently generating about -0.11 per unit of volatility. If you would invest 2,900 in EQT AB on January 5, 2025 and sell it today you would lose (169.00) from holding EQT AB or give up 5.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. EQT AB
Performance |
| Timeline |
| General Motors |
| EQT AB |
GM and EQT AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and EQT AB
The main advantage of trading using opposite GM and EQT AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, EQT AB 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 EQT AB will offset losses from the drop in EQT AB's long position.The idea behind General Motors and EQT AB 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.| EQT AB vs. Blackstone Group | EQT AB vs. The Bank of | EQT AB vs. Ameriprise Financial | EQT AB vs. State Street |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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