Correlation Between GM and Haier Smart
Can any of the company-specific risk be diversified away by investing in both GM and Haier Smart 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 Haier Smart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Haier Smart Home, you can compare the effects of market volatilities on GM and Haier Smart 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 Haier Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Haier Smart.
Diversification Opportunities for GM and Haier Smart
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Haier is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home 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 Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of GM i.e., GM and Haier Smart go up and down completely randomly.
Pair Corralation between GM and Haier Smart
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.43 times more return on investment than Haier Smart. However, GM is 1.43 times more volatile than Haier Smart Home. It trades about 0.12 of its potential returns per unit of risk. Haier Smart Home is currently generating about -0.14 per unit of risk. If you would invest 5,197 in General Motors on August 31, 2024 and sell it today you would earn a total of 353.00 from holding General Motors or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Haier Smart Home
Performance |
| Timeline |
| General Motors |
| Haier Smart Home |
GM and Haier Smart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Haier Smart
The main advantage of trading using opposite GM and Haier Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Haier Smart 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 Haier Smart will offset losses from the drop in Haier Smart's long position.The idea behind General Motors and Haier Smart Home 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.| Haier Smart vs. La Z Boy Incorporated | Haier Smart vs. MasterBrand | Haier Smart vs. MillerKnoll | Haier Smart vs. Flexsteel Industries |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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