Correlation Between GM and Bnteau SA
Can any of the company-specific risk be diversified away by investing in both GM and Bnteau SA 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 Bnteau SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Bnteau SA, you can compare the effects of market volatilities on GM and Bnteau SA 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 Bnteau SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Bnteau SA.
Diversification Opportunities for GM and Bnteau SA
Good diversification
The 3 months correlation between GM and Bnteau is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bnteau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bnteau SA 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 Bnteau SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bnteau SA has no effect on the direction of GM i.e., GM and Bnteau SA go up and down completely randomly.
Pair Corralation between GM and Bnteau SA
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.74 times more return on investment than Bnteau SA. However, General Motors is 1.35 times less risky than Bnteau SA. It trades about 0.08 of its potential returns per unit of risk. Bnteau SA is currently generating about -0.07 per unit of risk. If you would invest 4,935 in General Motors on August 29, 2024 and sell it today you would earn a total of 544.00 from holding General Motors or generate 11.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
General Motors vs. Bnteau SA
Performance |
| Timeline |
| General Motors |
| Bnteau SA |
GM and Bnteau SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Bnteau SA
The main advantage of trading using opposite GM and Bnteau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Bnteau SA 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 Bnteau SA will offset losses from the drop in Bnteau SA's long position.The idea behind General Motors and Bnteau SA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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