Correlation Between GM and China Resources
Can any of the company-specific risk be diversified away by investing in both GM and China Resources 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 China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and China Resources Cement, you can compare the effects of market volatilities on GM and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and China Resources.
Diversification Opportunities for GM and China Resources
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and China is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and China Resources Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Cement 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Cement has no effect on the direction of GM i.e., GM and China Resources go up and down completely randomly.
Pair Corralation between GM and China Resources
If you would invest 5,180 in General Motors on September 4, 2024 and sell it today you would earn a total of 324.00 from holding General Motors or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. China Resources Cement
Performance |
| Timeline |
| General Motors |
| China Resources Cement |
GM and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and China Resources
The main advantage of trading using opposite GM and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.The idea behind General Motors and China Resources Cement 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.| China Resources vs. Cementos Pacasmayo SAA | China Resources vs. Summit Materials | China Resources vs. Eagle Materials | China Resources vs. CRH PLC ADR |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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