Correlation Between GM and JBS SA
Can any of the company-specific risk be diversified away by investing in both GM and JBS SA 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 JBS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and JBS SA, you can compare the effects of market volatilities on GM and JBS SA 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 JBS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and JBS SA.
Diversification Opportunities for GM and JBS SA
Significant diversification
The 3 months correlation between GM and JBS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and JBS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBS SA 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 JBS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBS SA has no effect on the direction of GM i.e., GM and JBS SA go up and down completely randomly.
Pair Corralation between GM and JBS SA
Allowing for the 90-day total investment horizon GM is expected to generate 9.67 times less return on investment than JBS SA. But when comparing it to its historical volatility, General Motors is 1.66 times less risky than JBS SA. It trades about 0.06 of its potential returns per unit of risk. JBS SA is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 1,029 in JBS SA on January 3, 2025 and sell it today you would earn a total of 427.00 from holding JBS SA or generate 41.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. JBS SA
Performance |
| Timeline |
| General Motors |
| JBS SA |
GM and JBS SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and JBS SA
The main advantage of trading using opposite GM and JBS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, JBS SA 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 JBS SA will offset losses from the drop in JBS SA's long position.The idea behind General Motors and JBS SA 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.| JBS SA vs. BRF SA ADR | JBS SA vs. Natures Sunshine Products | JBS SA vs. Marfrig Global Foods | JBS SA vs. Bridgford Foods |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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