Correlation Between GM and J Sainsbury
Can any of the company-specific risk be diversified away by investing in both GM and J Sainsbury 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 J Sainsbury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and J Sainsbury PLC, you can compare the effects of market volatilities on GM and J Sainsbury 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 J Sainsbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and J Sainsbury.
Diversification Opportunities for GM and J Sainsbury
-0.92 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and JSAIY is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and J Sainsbury PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Sainsbury 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 J Sainsbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Sainsbury PLC has no effect on the direction of GM i.e., GM and J Sainsbury go up and down completely randomly.
Pair Corralation between GM and J Sainsbury
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.33 times more return on investment than J Sainsbury. However, GM is 1.33 times more volatile than J Sainsbury PLC. It trades about 0.07 of its potential returns per unit of risk. J Sainsbury PLC is currently generating about 0.03 per unit of risk. If you would invest 3,524 in General Motors on August 28, 2024 and sell it today you would earn a total of 2,496 from holding General Motors or generate 70.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
General Motors vs. J Sainsbury PLC
Performance |
| Timeline |
| General Motors |
| J Sainsbury PLC |
GM and J Sainsbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and J Sainsbury
The main advantage of trading using opposite GM and J Sainsbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, J Sainsbury 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 J Sainsbury will offset losses from the drop in J Sainsbury's long position.The idea behind General Motors and J Sainsbury 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.| J Sainsbury vs. Natural Grocers by | J Sainsbury vs. Grocery Outlet Holding | J Sainsbury vs. Village Super Market | J Sainsbury vs. Ingles Markets Incorporated |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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