Correlation Between GM and Ace Hardware
Can any of the company-specific risk be diversified away by investing in both GM and Ace Hardware 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 Ace Hardware into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Ace Hardware Indonesia, you can compare the effects of market volatilities on GM and Ace Hardware 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 Ace Hardware. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ace Hardware.
Diversification Opportunities for GM and Ace Hardware
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and Ace is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ace Hardware Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ace Hardware Indonesia 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 Ace Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ace Hardware Indonesia has no effect on the direction of GM i.e., GM and Ace Hardware go up and down completely randomly.
Pair Corralation between GM and Ace Hardware
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Ace Hardware. In addition to that, GM is 1.34 times more volatile than Ace Hardware Indonesia. It trades about -0.05 of its total potential returns per unit of risk. Ace Hardware Indonesia is currently generating about -0.01 per unit of volatility. If you would invest 75,500 in Ace Hardware Indonesia on November 3, 2024 and sell it today you would lose (500.00) from holding Ace Hardware Indonesia or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
General Motors vs. Ace Hardware Indonesia
Performance |
| Timeline |
| General Motors |
| Ace Hardware Indonesia |
GM and Ace Hardware Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Ace Hardware
The main advantage of trading using opposite GM and Ace Hardware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Ace Hardware 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 Ace Hardware will offset losses from the drop in Ace Hardware's long position.The idea behind General Motors and Ace Hardware Indonesia 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.| Ace Hardware vs. Japfa Comfeed Indonesia | Ace Hardware vs. Charoen Pokphand Indonesia | Ace Hardware vs. Erajaya Swasembada Tbk | Ace Hardware vs. Indofood Cbp Sukses |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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