Correlation Between GM and CMC Investment
Can any of the company-specific risk be diversified away by investing in both GM and CMC Investment 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 CMC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and CMC Investment JSC, you can compare the effects of market volatilities on GM and CMC Investment 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 CMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and CMC Investment.
Diversification Opportunities for GM and CMC Investment
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and CMC is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CMC Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Investment JSC 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 CMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Investment JSC has no effect on the direction of GM i.e., GM and CMC Investment go up and down completely randomly.
Pair Corralation between GM and CMC Investment
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.39 times more return on investment than CMC Investment. However, General Motors is 2.54 times less risky than CMC Investment. It trades about 0.09 of its potential returns per unit of risk. CMC Investment JSC is currently generating about 0.01 per unit of risk. If you would invest 4,044 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,515 from holding General Motors or generate 37.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 66.49% |
| Values | Daily Returns |
General Motors vs. CMC Investment JSC
Performance |
| Timeline |
| General Motors |
| CMC Investment JSC |
GM and CMC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and CMC Investment
The main advantage of trading using opposite GM and CMC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, CMC Investment 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 CMC Investment will offset losses from the drop in CMC Investment's long position.The idea behind General Motors and CMC Investment JSC 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.| CMC Investment vs. FIT INVEST JSC | CMC Investment vs. Damsan JSC | CMC Investment vs. An Phat Plastic | CMC Investment vs. Alphanam ME |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |