Correlation Between GM and CEMATRIX
Can any of the company-specific risk be diversified away by investing in both GM and CEMATRIX 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 CEMATRIX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and CEMATRIX, you can compare the effects of market volatilities on GM and CEMATRIX 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 CEMATRIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and CEMATRIX.
Diversification Opportunities for GM and CEMATRIX
Poor diversification
The 3 months correlation between GM and CEMATRIX is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CEMATRIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEMATRIX 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 CEMATRIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEMATRIX has no effect on the direction of GM i.e., GM and CEMATRIX go up and down completely randomly.
Pair Corralation between GM and CEMATRIX
Allowing for the 90-day total investment horizon GM is expected to generate 2.44 times less return on investment than CEMATRIX. But when comparing it to its historical volatility, General Motors is 2.32 times less risky than CEMATRIX. It trades about 0.03 of its potential returns per unit of risk. CEMATRIX is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 14.00 in CEMATRIX on November 5, 2024 and sell it today you would earn a total of 2.00 from holding CEMATRIX or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
General Motors vs. CEMATRIX
Performance |
| Timeline |
| General Motors |
| CEMATRIX |
GM and CEMATRIX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and CEMATRIX
The main advantage of trading using opposite GM and CEMATRIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, CEMATRIX 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 CEMATRIX will offset losses from the drop in CEMATRIX's long position.The idea behind General Motors and CEMATRIX 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.| CEMATRIX vs. Tecnoglass | CEMATRIX vs. Xinyi Glass Holdings | CEMATRIX vs. Anhui Conch Cement | CEMATRIX vs. Basanite |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |