Correlation Between GM and Den Networks
Can any of the company-specific risk be diversified away by investing in both GM and Den Networks 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 Den Networks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Den Networks Limited, you can compare the effects of market volatilities on GM and Den Networks 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 Den Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Den Networks.
Diversification Opportunities for GM and Den Networks
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Den is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Den Networks Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Den Networks Limited 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 Den Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Den Networks Limited has no effect on the direction of GM i.e., GM and Den Networks go up and down completely randomly.
Pair Corralation between GM and Den Networks
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.75 times more return on investment than Den Networks. However, General Motors is 1.33 times less risky than Den Networks. It trades about 0.11 of its potential returns per unit of risk. Den Networks Limited is currently generating about -0.03 per unit of risk. If you would invest 3,324 in General Motors on September 2, 2024 and sell it today you would earn a total of 2,235 from holding General Motors or generate 67.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 98.79% |
| Values | Daily Returns |
General Motors vs. Den Networks Limited
Performance |
| Timeline |
| General Motors |
| Den Networks Limited |
GM and Den Networks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Den Networks
The main advantage of trading using opposite GM and Den Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Den Networks 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 Den Networks will offset losses from the drop in Den Networks' long position.The idea behind General Motors and Den Networks Limited 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.| Den Networks vs. Nazara Technologies Limited | Den Networks vs. Orient Technologies Limited | Den Networks vs. Som Distilleries Breweries | Den Networks vs. Sasken Technologies Limited |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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