Correlation Between GM and Essentra Plc
Can any of the company-specific risk be diversified away by investing in both GM and Essentra Plc 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 Essentra Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Essentra Plc, you can compare the effects of market volatilities on GM and Essentra Plc 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 Essentra Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Essentra Plc.
Diversification Opportunities for GM and Essentra Plc
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Essentra is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Essentra Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essentra Plc 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 Essentra Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essentra Plc has no effect on the direction of GM i.e., GM and Essentra Plc go up and down completely randomly.
Pair Corralation between GM and Essentra Plc
If you would invest 5,096 in General Motors on September 2, 2024 and sell it today you would earn a total of 463.00 from holding General Motors or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
General Motors vs. Essentra Plc
Performance |
| Timeline |
| General Motors |
| Essentra Plc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Essentra Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Essentra Plc
The main advantage of trading using opposite GM and Essentra Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Essentra Plc 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 Essentra Plc will offset losses from the drop in Essentra Plc's long position.The idea behind General Motors and Essentra Plc 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.| Essentra Plc vs. LyondellBasell Industries NV | Essentra Plc vs. International Flavors Fragrances | Essentra Plc vs. Cabot | Essentra Plc vs. Westlake Chemical |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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