Correlation Between GM and Crescent Steel
Can any of the company-specific risk be diversified away by investing in both GM and Crescent Steel 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 Crescent Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Crescent Steel Allied, you can compare the effects of market volatilities on GM and Crescent Steel 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 Crescent Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Crescent Steel.
Diversification Opportunities for GM and Crescent Steel
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Crescent is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Crescent Steel Allied in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Steel Allied 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 Crescent Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Steel Allied has no effect on the direction of GM i.e., GM and Crescent Steel go up and down completely randomly.
Pair Corralation between GM and Crescent Steel
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Crescent Steel. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.32 times less risky than Crescent Steel. The stock trades about -0.13 of its potential returns per unit of risk. The Crescent Steel Allied is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 11,527 in Crescent Steel Allied on November 5, 2024 and sell it today you would lose (439.00) from holding Crescent Steel Allied or give up 3.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
General Motors vs. Crescent Steel Allied
Performance |
| Timeline |
| General Motors |
| Crescent Steel Allied |
GM and Crescent Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Crescent Steel
The main advantage of trading using opposite GM and Crescent Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Crescent Steel 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 Crescent Steel will offset losses from the drop in Crescent Steel's long position.The idea behind General Motors and Crescent Steel Allied 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.| Crescent Steel vs. Crescent Star Insurance | Crescent Steel vs. Shaheen Insurance | Crescent Steel vs. Unilever Pakistan Foods | Crescent Steel vs. Pakistan Reinsurance |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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