Correlation Between GM and Eastern Star
Can any of the company-specific risk be diversified away by investing in both GM and Eastern Star 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 Eastern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Eastern Star Real, you can compare the effects of market volatilities on GM and Eastern Star 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 Eastern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Eastern Star.
Diversification Opportunities for GM and Eastern Star
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Eastern is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Eastern Star Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Star Real 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 Eastern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Star Real has no effect on the direction of GM i.e., GM and Eastern Star go up and down completely randomly.
Pair Corralation between GM and Eastern Star
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.96 times more return on investment than Eastern Star. However, General Motors is 1.04 times less risky than Eastern Star. It trades about 0.25 of its potential returns per unit of risk. Eastern Star Real is currently generating about -0.08 per unit of risk. If you would invest 5,272 in General Motors on August 25, 2024 and sell it today you would earn a total of 581.00 from holding General Motors or generate 11.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Eastern Star Real
Performance |
| Timeline |
| General Motors |
| Eastern Star Real |
GM and Eastern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Eastern Star
The main advantage of trading using opposite GM and Eastern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Eastern Star 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 Eastern Star will offset losses from the drop in Eastern Star's long position.The idea behind General Motors and Eastern Star Real 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.| Eastern Star vs. Bangkok Land Public | Eastern Star vs. Everland Public | Eastern Star vs. Amata Public | Eastern Star vs. Chonburi Concrete Product |
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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