Correlation Between GM and NISSHA
Can any of the company-specific risk be diversified away by investing in both GM and NISSHA 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 NISSHA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and NISSHA LTD, you can compare the effects of market volatilities on GM and NISSHA 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 NISSHA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and NISSHA.
Diversification Opportunities for GM and NISSHA
Pay attention - limited upside
The 3 months correlation between GM and NISSHA is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NISSHA LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISSHA LTD 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 NISSHA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISSHA LTD has no effect on the direction of GM i.e., GM and NISSHA go up and down completely randomly.
Pair Corralation between GM and NISSHA
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.96 times more return on investment than NISSHA. However, General Motors is 1.04 times less risky than NISSHA. It trades about 0.05 of its potential returns per unit of risk. NISSHA LTD is currently generating about -0.01 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,754 from holding General Motors or generate 46.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.02% |
| Values | Daily Returns |
General Motors vs. NISSHA LTD
Performance |
| Timeline |
| General Motors |
| NISSHA LTD |
GM and NISSHA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and NISSHA
The main advantage of trading using opposite GM and NISSHA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, NISSHA 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 NISSHA will offset losses from the drop in NISSHA's long position.The idea behind General Motors and NISSHA LTD 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.| NISSHA vs. CompuGroup Medical SE | NISSHA vs. SAFETY MEDICAL PROD | NISSHA vs. Compugroup Medical SE | NISSHA vs. Retail Estates 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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