Correlation Between GM and Cinemark Holdings
Can any of the company-specific risk be diversified away by investing in both GM and Cinemark Holdings 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 Cinemark Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Cinemark Holdings, you can compare the effects of market volatilities on GM and Cinemark Holdings 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 Cinemark Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Cinemark Holdings.
Diversification Opportunities for GM and Cinemark Holdings
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Cinemark is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Cinemark Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cinemark Holdings 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 Cinemark Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cinemark Holdings has no effect on the direction of GM i.e., GM and Cinemark Holdings go up and down completely randomly.
Pair Corralation between GM and Cinemark Holdings
Allowing for the 90-day total investment horizon GM is expected to generate 1.01 times less return on investment than Cinemark Holdings. In addition to that, GM is 1.02 times more volatile than Cinemark Holdings. It trades about 0.26 of its total potential returns per unit of risk. Cinemark Holdings is currently generating about 0.27 per unit of volatility. If you would invest 2,937 in Cinemark Holdings on August 27, 2024 and sell it today you would earn a total of 326.00 from holding Cinemark Holdings or generate 11.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Cinemark Holdings
Performance |
| Timeline |
| General Motors |
| Cinemark Holdings |
GM and Cinemark Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Cinemark Holdings
The main advantage of trading using opposite GM and Cinemark Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Cinemark Holdings 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 Cinemark Holdings will offset losses from the drop in Cinemark Holdings' long position.The idea behind General Motors and Cinemark Holdings 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.| Cinemark Holdings vs. News Corp B | Cinemark Holdings vs. Marcus | Cinemark Holdings vs. Liberty Media | Cinemark Holdings vs. Warner Music Group |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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