Correlation Between GM and C PARAN
Can any of the company-specific risk be diversified away by investing in both GM and C PARAN 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 C PARAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and C PARAN EN, you can compare the effects of market volatilities on GM and C PARAN 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 C PARAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and C PARAN.
Diversification Opportunities for GM and C PARAN
Pay attention - limited upside
The 3 months correlation between GM and ELP1 is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and C PARAN EN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C PARAN EN 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 C PARAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C PARAN EN has no effect on the direction of GM i.e., GM and C PARAN go up and down completely randomly.
Pair Corralation between GM and C PARAN
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the C PARAN. In addition to that, GM is 1.11 times more volatile than C PARAN EN. It trades about -0.14 of its total potential returns per unit of risk. C PARAN EN is currently generating about -0.04 per unit of volatility. If you would invest 580.00 in C PARAN EN on September 13, 2024 and sell it today you would lose (15.00) from holding C PARAN EN or give up 2.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. C PARAN EN
Performance |
| Timeline |
| General Motors |
| C PARAN EN |
GM and C PARAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and C PARAN
The main advantage of trading using opposite GM and C PARAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, C PARAN 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 C PARAN will offset losses from the drop in C PARAN's long position.The idea behind General Motors and C PARAN EN 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.| C PARAN vs. SSE PLC ADR | C PARAN vs. CIA ENGER ADR | C PARAN vs. Companhia Energtica de | C PARAN vs. EVN AG |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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