Correlation Between GM and Magni Tech
Can any of the company-specific risk be diversified away by investing in both GM and Magni Tech 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 Magni Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Magni Tech Industries, you can compare the effects of market volatilities on GM and Magni Tech 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 Magni Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Magni Tech.
Diversification Opportunities for GM and Magni Tech
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Magni is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Magni Tech Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magni Tech Industries 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 Magni Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magni Tech Industries has no effect on the direction of GM i.e., GM and Magni Tech go up and down completely randomly.
Pair Corralation between GM and Magni Tech
Allowing for the 90-day total investment horizon GM is expected to generate 1.03 times less return on investment than Magni Tech. In addition to that, GM is 1.17 times more volatile than Magni Tech Industries. It trades about 0.08 of its total potential returns per unit of risk. Magni Tech Industries is currently generating about 0.1 per unit of volatility. If you would invest 215.00 in Magni Tech Industries on September 2, 2024 and sell it today you would earn a total of 55.00 from holding Magni Tech Industries or generate 25.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Magni Tech Industries
Performance |
| Timeline |
| General Motors |
| Magni Tech Industries |
GM and Magni Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Magni Tech
The main advantage of trading using opposite GM and Magni Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Magni Tech 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 Magni Tech will offset losses from the drop in Magni Tech's long position.The idea behind General Motors and Magni Tech Industries 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.| Magni Tech vs. Southern Steel Bhd | Magni Tech vs. Al Aqar Healthcare | Magni Tech vs. Sports Toto Berhad | Magni Tech vs. KPJ Healthcare 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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