Correlation Between GM and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both GM and JAPAN TOBACCO 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 JAPAN TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on GM and JAPAN TOBACCO 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 JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and JAPAN TOBACCO.
Diversification Opportunities for GM and JAPAN TOBACCO
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and JAPAN is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of GM i.e., GM and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between GM and JAPAN TOBACCO
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.14 times more return on investment than JAPAN TOBACCO. However, GM is 1.14 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.32 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.05 per unit of risk. If you would invest 5,273 in General Motors on August 28, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. JAPAN TOBACCO UNSPADR12
Performance |
| Timeline |
| General Motors |
| JAPAN TOBACCO UNSPADR12 |
GM and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and JAPAN TOBACCO
The main advantage of trading using opposite GM and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, JAPAN TOBACCO 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 JAPAN TOBACCO will offset losses from the drop in JAPAN TOBACCO's long position.The idea behind General Motors and JAPAN TOBACCO UNSPADR12 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.| JAPAN TOBACCO vs. Burlington Stores | JAPAN TOBACCO vs. SWISS WATER DECAFFCOFFEE | JAPAN TOBACCO vs. FAST RETAIL ADR | JAPAN TOBACCO vs. Darden Restaurants |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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