Correlation Between GM and Companhia Paranaense
Can any of the company-specific risk be diversified away by investing in both GM and Companhia Paranaense 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 Companhia Paranaense into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Companhia Paranaense de, you can compare the effects of market volatilities on GM and Companhia Paranaense 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 Companhia Paranaense. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Companhia Paranaense.
Diversification Opportunities for GM and Companhia Paranaense
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Companhia is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense 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 Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of GM i.e., GM and Companhia Paranaense go up and down completely randomly.
Pair Corralation between GM and Companhia Paranaense
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.45 times more return on investment than Companhia Paranaense. However, GM is 1.45 times more volatile than Companhia Paranaense de. It trades about 0.07 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about 0.06 per unit of risk. If you would invest 3,889 in General Motors on August 28, 2024 and sell it today you would earn a total of 2,131 from holding General Motors or generate 54.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
General Motors vs. Companhia Paranaense de
Performance |
| Timeline |
| General Motors |
| Companhia Paranaense |
GM and Companhia Paranaense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Companhia Paranaense
The main advantage of trading using opposite GM and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Companhia Paranaense 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 Companhia Paranaense will offset losses from the drop in Companhia Paranaense's long position.The idea behind General Motors and Companhia Paranaense de 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.| Companhia Paranaense vs. CTEEP Companhia | Companhia Paranaense vs. BB Seguridade Participacoes | Companhia Paranaense vs. Transmissora Aliana de | Companhia Paranaense vs. Itasa Investimentos |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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