Correlation Between GM and Dragon Capital
Can any of the company-specific risk be diversified away by investing in both GM and Dragon Capital 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 Dragon Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Dragon Capital Grp, you can compare the effects of market volatilities on GM and Dragon Capital 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 Dragon Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Dragon Capital.
Diversification Opportunities for GM and Dragon Capital
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Dragon is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Dragon Capital Grp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dragon Capital Grp 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 Dragon Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dragon Capital Grp has no effect on the direction of GM i.e., GM and Dragon Capital go up and down completely randomly.
Pair Corralation between GM and Dragon Capital
Allowing for the 90-day total investment horizon GM is expected to generate 16.79 times less return on investment than Dragon Capital. But when comparing it to its historical volatility, General Motors is 17.79 times less risky than Dragon Capital. It trades about 0.17 of its potential returns per unit of risk. Dragon Capital Grp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 0.03 in Dragon Capital Grp on September 1, 2024 and sell it today you would earn a total of 0.00 from holding Dragon Capital Grp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Dragon Capital Grp
Performance |
| Timeline |
| General Motors |
| Dragon Capital Grp |
GM and Dragon Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Dragon Capital
The main advantage of trading using opposite GM and Dragon Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Dragon Capital 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 Dragon Capital will offset losses from the drop in Dragon Capital's long position.The idea behind General Motors and Dragon Capital Grp 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.| Dragon Capital vs. Crypto Co | Dragon Capital vs. Global Develpmts | Dragon Capital vs. Parsons Corp | Dragon Capital vs. GBT 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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