Correlation Between GM and China Conch
Can any of the company-specific risk be diversified away by investing in both GM and China Conch 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 Conch 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 Conch Venture, you can compare the effects of market volatilities on GM and China Conch 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 Conch. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and China Conch.
Diversification Opportunities for GM and China Conch
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and China is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and China Conch Venture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Conch Venture 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 Conch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Conch Venture has no effect on the direction of GM i.e., GM and China Conch go up and down completely randomly.
Pair Corralation between GM and China Conch
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.59 times more return on investment than China Conch. However, General Motors is 1.69 times less risky than China Conch. It trades about 0.04 of its potential returns per unit of risk. China Conch Venture is currently generating about -0.04 per unit of risk. If you would invest 3,712 in General Motors on November 28, 2024 and sell it today you would earn a total of 1,213 from holding General Motors or generate 32.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
General Motors vs. China Conch Venture
Performance |
| Timeline |
| General Motors |
| China Conch Venture |
GM and China Conch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and China Conch
The main advantage of trading using opposite GM and China Conch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, China Conch 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 Conch will offset losses from the drop in China Conch's long position.The idea behind General Motors and China Conch Venture 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 Conch vs. Arrow Electronics | China Conch vs. Jerash Holdings | China Conch vs. Boot Barn Holdings | China Conch vs. Grounded People Apparel |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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