Correlation Between GM and Banco Hipotecario
Can any of the company-specific risk be diversified away by investing in both GM and Banco Hipotecario 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 Banco Hipotecario into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Banco Hipotecario SA, you can compare the effects of market volatilities on GM and Banco Hipotecario 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 Banco Hipotecario. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Banco Hipotecario.
Diversification Opportunities for GM and Banco Hipotecario
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Banco is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Banco Hipotecario SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Hipotecario 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 Banco Hipotecario. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Hipotecario has no effect on the direction of GM i.e., GM and Banco Hipotecario go up and down completely randomly.
Pair Corralation between GM and Banco Hipotecario
Allowing for the 90-day total investment horizon GM is expected to generate 2.25 times less return on investment than Banco Hipotecario. But when comparing it to its historical volatility, General Motors is 1.17 times less risky than Banco Hipotecario. It trades about 0.14 of its potential returns per unit of risk. Banco Hipotecario SA is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 41,000 in Banco Hipotecario SA on September 3, 2024 and sell it today you would earn a total of 7,400 from holding Banco Hipotecario SA or generate 18.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Banco Hipotecario SA
Performance |
| Timeline |
| General Motors |
| Banco Hipotecario |
GM and Banco Hipotecario Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Banco Hipotecario
The main advantage of trading using opposite GM and Banco Hipotecario positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Banco Hipotecario 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 Banco Hipotecario will offset losses from the drop in Banco Hipotecario's long position.The idea behind General Motors and Banco Hipotecario 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.| Banco Hipotecario vs. Harmony Gold Mining | Banco Hipotecario vs. Agrometal SAI | Banco Hipotecario vs. Compania de Transporte | Banco Hipotecario vs. Transportadora de Gas |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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