Correlation Between GM and DistIT AB
Can any of the company-specific risk be diversified away by investing in both GM and DistIT AB 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 DistIT AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and DistIT AB, you can compare the effects of market volatilities on GM and DistIT AB 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 DistIT AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and DistIT AB.
Diversification Opportunities for GM and DistIT AB
Very good diversification
The 3 months correlation between GM and DistIT is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and DistIT AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DistIT AB 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 DistIT AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DistIT AB has no effect on the direction of GM i.e., GM and DistIT AB go up and down completely randomly.
Pair Corralation between GM and DistIT AB
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the DistIT AB. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 3.48 times less risky than DistIT AB. The stock trades about -0.12 of its potential returns per unit of risk. The DistIT AB is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 276.00 in DistIT AB on November 30, 2024 and sell it today you would earn a total of 21.00 from holding DistIT AB or generate 7.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. DistIT AB
Performance |
| Timeline |
| General Motors |
| DistIT AB |
GM and DistIT AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and DistIT AB
The main advantage of trading using opposite GM and DistIT AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, DistIT AB 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 DistIT AB will offset losses from the drop in DistIT AB's long position.The idea behind General Motors and DistIT AB 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.| DistIT AB vs. Alcadon Group AB | DistIT AB vs. IAR Systems Group | DistIT AB vs. Bulten AB | DistIT AB vs. Dustin Group AB |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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