Correlation Between GM and Carl Zeiss
Can any of the company-specific risk be diversified away by investing in both GM and Carl Zeiss 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 Carl Zeiss into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Carl Zeiss Meditec, you can compare the effects of market volatilities on GM and Carl Zeiss 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 Carl Zeiss. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Carl Zeiss.
Diversification Opportunities for GM and Carl Zeiss
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Carl is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Carl Zeiss Meditec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carl Zeiss Meditec 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 Carl Zeiss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carl Zeiss Meditec has no effect on the direction of GM i.e., GM and Carl Zeiss go up and down completely randomly.
Pair Corralation between GM and Carl Zeiss
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.18 times more return on investment than Carl Zeiss. However, GM is 2.18 times more volatile than Carl Zeiss Meditec. It trades about 0.17 of its potential returns per unit of risk. Carl Zeiss Meditec is currently generating about -0.3 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Carl Zeiss Meditec
Performance |
| Timeline |
| General Motors |
| Carl Zeiss Meditec |
GM and Carl Zeiss Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Carl Zeiss
The main advantage of trading using opposite GM and Carl Zeiss positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Carl Zeiss 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 Carl Zeiss will offset losses from the drop in Carl Zeiss' long position.The idea behind General Motors and Carl Zeiss Meditec 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.| Carl Zeiss vs. Carl Zeiss Meditec | Carl Zeiss vs. Coloplast AS | Carl Zeiss vs. Straumann Holding AG | Carl Zeiss vs. EssilorLuxottica Socit anonyme |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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