Correlation Between GM and BRNPB
Can any of the company-specific risk be diversified away by investing in both GM and BRNPB 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 BRNPB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and BRNPB, you can compare the effects of market volatilities on GM and BRNPB 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 BRNPB. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and BRNPB.
Diversification Opportunities for GM and BRNPB
Very good diversification
The 3 months correlation between GM and BRNPB is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BRNPB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRNPB 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 BRNPB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRNPB has no effect on the direction of GM i.e., GM and BRNPB go up and down completely randomly.
Pair Corralation between GM and BRNPB
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the BRNPB. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 4.75 times less risky than BRNPB. The stock trades about -0.32 of its potential returns per unit of risk. The BRNPB is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 10,710 in BRNPB on November 28, 2024 and sell it today you would lose (610.00) from holding BRNPB or give up 5.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 23.81% |
| Values | Daily Returns |
General Motors vs. BRNPB
Performance |
| Timeline |
| General Motors |
| BRNPB |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
GM and BRNPB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and BRNPB
The main advantage of trading using opposite GM and BRNPB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, BRNPB 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 BRNPB will offset losses from the drop in BRNPB's long position.The idea behind General Motors and BRNPB 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |