Correlation Between GM and CB Industrial
Can any of the company-specific risk be diversified away by investing in both GM and CB Industrial 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 CB Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and CB Industrial Product, you can compare the effects of market volatilities on GM and CB Industrial 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 CB Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and CB Industrial.
Diversification Opportunities for GM and CB Industrial
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and 7076 is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CB Industrial Product in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CB Industrial Product 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 CB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CB Industrial Product has no effect on the direction of GM i.e., GM and CB Industrial go up and down completely randomly.
Pair Corralation between GM and CB Industrial
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.0 times more return on investment than CB Industrial. However, GM is 1.0 times more volatile than CB Industrial Product. It trades about 0.07 of its potential returns per unit of risk. CB Industrial Product is currently generating about 0.04 per unit of risk. If you would invest 3,524 in General Motors on August 28, 2024 and sell it today you would earn a total of 2,496 from holding General Motors or generate 70.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.59% |
| Values | Daily Returns |
General Motors vs. CB Industrial Product
Performance |
| Timeline |
| General Motors |
| CB Industrial Product |
GM and CB Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and CB Industrial
The main advantage of trading using opposite GM and CB Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, CB Industrial 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 CB Industrial will offset losses from the drop in CB Industrial's long position.The idea behind General Motors and CB Industrial Product 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.| CB Industrial vs. MyTech Group Bhd | CB Industrial vs. YX Precious Metals | CB Industrial vs. Greatech Technology Bhd | CB Industrial vs. Sunzen Biotech Bhd |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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