Correlation Between GM and Jensen Global
Can any of the company-specific risk be diversified away by investing in both GM and Jensen Global 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 Jensen Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Jensen Global Quality, you can compare the effects of market volatilities on GM and Jensen Global 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 Jensen Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Jensen Global.
Diversification Opportunities for GM and Jensen Global
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Jensen is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Jensen Global Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jensen Global Quality 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 Jensen Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jensen Global Quality has no effect on the direction of GM i.e., GM and Jensen Global go up and down completely randomly.
Pair Corralation between GM and Jensen Global
Allowing for the 90-day total investment horizon General Motors is expected to generate 4.74 times more return on investment than Jensen Global. However, GM is 4.74 times more volatile than Jensen Global Quality. It trades about 0.17 of its potential returns per unit of risk. Jensen Global Quality is currently generating about 0.21 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Jensen Global Quality
Performance |
| Timeline |
| General Motors |
| Jensen Global Quality |
GM and Jensen Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Jensen Global
The main advantage of trading using opposite GM and Jensen Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Jensen Global 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 Jensen Global will offset losses from the drop in Jensen Global's long position.The idea behind General Motors and Jensen Global Quality 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.| Jensen Global vs. The Jensen Portfolio | Jensen Global vs. The Jensen Portfolio | Jensen Global vs. The Jensen Portfolio | Jensen Global vs. The Jensen Portfolio |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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