Correlation Between GM and China Infrastructure
Can any of the company-specific risk be diversified away by investing in both GM and China Infrastructure 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 Infrastructure 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 Infrastructure Construction, you can compare the effects of market volatilities on GM and China Infrastructure 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 Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and China Infrastructure.
Diversification Opportunities for GM and China Infrastructure
-0.21 | Correlation Coefficient |
Very good 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 Infrastructure Construct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Infrastructure 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 Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Infrastructure has no effect on the direction of GM i.e., GM and China Infrastructure go up and down completely randomly.
Pair Corralation between GM and China Infrastructure
Allowing for the 90-day total investment horizon GM is expected to generate 1.14 times less return on investment than China Infrastructure. But when comparing it to its historical volatility, General Motors is 5.98 times less risky than China Infrastructure. It trades about 0.05 of its potential returns per unit of risk. China Infrastructure Construction is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 0.11 in China Infrastructure Construction on August 29, 2024 and sell it today you would lose (0.07) from holding China Infrastructure Construction or give up 63.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 31.52% |
| Values | Daily Returns |
General Motors vs. China Infrastructure Construct
Performance |
| Timeline |
| General Motors |
| China Infrastructure |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and China Infrastructure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and China Infrastructure
The main advantage of trading using opposite GM and China Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, China Infrastructure 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 Infrastructure will offset losses from the drop in China Infrastructure's long position.The idea behind General Motors and China Infrastructure Construction 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 Infrastructure vs. Medicine Man Technologies | China Infrastructure vs. Kona Gold Solutions | China Infrastructure vs. Green Thumb Industries | China Infrastructure vs. Cann American Corp |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |