Correlation Between GM and Delek Automotive
Can any of the company-specific risk be diversified away by investing in both GM and Delek Automotive 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 Delek Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Delek Automotive Systems, you can compare the effects of market volatilities on GM and Delek Automotive 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 Delek Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Delek Automotive.
Diversification Opportunities for GM and Delek Automotive
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Delek is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Delek Automotive Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Automotive Systems 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 Delek Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Automotive Systems has no effect on the direction of GM i.e., GM and Delek Automotive go up and down completely randomly.
Pair Corralation between GM and Delek Automotive
Allowing for the 90-day total investment horizon GM is expected to generate 1.28 times less return on investment than Delek Automotive. In addition to that, GM is 1.27 times more volatile than Delek Automotive Systems. It trades about 0.17 of its total potential returns per unit of risk. Delek Automotive Systems is currently generating about 0.27 per unit of volatility. If you would invest 231,200 in Delek Automotive Systems on September 1, 2024 and sell it today you would earn a total of 25,400 from holding Delek Automotive Systems or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.71% |
| Values | Daily Returns |
General Motors vs. Delek Automotive Systems
Performance |
| Timeline |
| General Motors |
| Delek Automotive Systems |
GM and Delek Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Delek Automotive
The main advantage of trading using opposite GM and Delek Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Delek Automotive 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 Delek Automotive will offset losses from the drop in Delek Automotive's long position.The idea behind General Motors and Delek Automotive Systems 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.| Delek Automotive vs. El Al Israel | Delek Automotive vs. Magic Software Enterprises | Delek Automotive vs. Neto Malinda | Delek Automotive vs. Orbit Technologies |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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