Correlation Between GM and COMBA TELECOM
Can any of the company-specific risk be diversified away by investing in both GM and COMBA TELECOM 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 COMBA TELECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and COMBA TELECOM SYST, you can compare the effects of market volatilities on GM and COMBA TELECOM 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 COMBA TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and COMBA TELECOM.
Diversification Opportunities for GM and COMBA TELECOM
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and COMBA is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and COMBA TELECOM SYST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMBA TELECOM SYST 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 COMBA TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMBA TELECOM SYST has no effect on the direction of GM i.e., GM and COMBA TELECOM go up and down completely randomly.
Pair Corralation between GM and COMBA TELECOM
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.75 times more return on investment than COMBA TELECOM. However, GM is 1.75 times more volatile than COMBA TELECOM SYST. It trades about 0.07 of its potential returns per unit of risk. COMBA TELECOM SYST is currently generating about -0.21 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. COMBA TELECOM SYST
Performance |
| Timeline |
| General Motors |
| COMBA TELECOM SYST |
GM and COMBA TELECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and COMBA TELECOM
The main advantage of trading using opposite GM and COMBA TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, COMBA TELECOM 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 COMBA TELECOM will offset losses from the drop in COMBA TELECOM's long position.The idea behind General Motors and COMBA TELECOM SYST 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.| COMBA TELECOM vs. Apple Inc | COMBA TELECOM vs. Apple Inc | COMBA TELECOM vs. Microsoft | COMBA TELECOM vs. Microsoft |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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