Correlation Between GM and PChome Online
Can any of the company-specific risk be diversified away by investing in both GM and PChome Online 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 PChome Online into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and PChome Online, you can compare the effects of market volatilities on GM and PChome Online 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 PChome Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and PChome Online.
Diversification Opportunities for GM and PChome Online
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and PChome is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and PChome Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PChome Online 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 PChome Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PChome Online has no effect on the direction of GM i.e., GM and PChome Online go up and down completely randomly.
Pair Corralation between GM and PChome Online
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the PChome Online. In addition to that, GM is 1.18 times more volatile than PChome Online. It trades about -0.05 of its total potential returns per unit of risk. PChome Online is currently generating about -0.05 per unit of volatility. If you would invest 4,350 in PChome Online on November 3, 2024 and sell it today you would lose (105.00) from holding PChome Online or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 80.0% |
| Values | Daily Returns |
General Motors vs. PChome Online
Performance |
| Timeline |
| General Motors |
| PChome Online |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and PChome Online Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and PChome Online
The main advantage of trading using opposite GM and PChome Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, PChome Online 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 PChome Online will offset losses from the drop in PChome Online's long position.The idea behind General Motors and PChome Online 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.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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