Correlation Between GM and Deutz AG
Can any of the company-specific risk be diversified away by investing in both GM and Deutz AG 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 Deutz AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Deutz AG, you can compare the effects of market volatilities on GM and Deutz AG 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 Deutz AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Deutz AG.
Diversification Opportunities for GM and Deutz AG
Excellent diversification
The 3 months correlation between GM and Deutz is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Deutz AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutz AG 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 Deutz AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutz AG has no effect on the direction of GM i.e., GM and Deutz AG go up and down completely randomly.
Pair Corralation between GM and Deutz AG
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Deutz AG. In addition to that, GM is 2.31 times more volatile than Deutz AG. It trades about -0.16 of its total potential returns per unit of risk. Deutz AG is currently generating about 0.17 per unit of volatility. If you would invest 400.00 in Deutz AG on September 13, 2024 and sell it today you would earn a total of 16.00 from holding Deutz AG or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Deutz AG
Performance |
| Timeline |
| General Motors |
| Deutz AG |
GM and Deutz AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Deutz AG
The main advantage of trading using opposite GM and Deutz AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Deutz AG 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 Deutz AG will offset losses from the drop in Deutz AG's long position.The idea behind General Motors and Deutz AG 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.| Deutz AG vs. Auto Trader Group | Deutz AG vs. PennyMac Mortgage Investment | Deutz AG vs. CarsalesCom | Deutz AG vs. AGNC INVESTMENT |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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