Correlation Between GM and KEISEI EL

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Can any of the company-specific risk be diversified away by investing in both GM and KEISEI EL 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 KEISEI EL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and KEISEI EL RAILWAY, you can compare the effects of market volatilities on GM and KEISEI EL 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 KEISEI EL. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and KEISEI EL.

Diversification Opportunities for GM and KEISEI EL

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between GM and KEISEI is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and KEISEI EL RAILWAY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEISEI EL RAILWAY 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 KEISEI EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEISEI EL RAILWAY has no effect on the direction of GM i.e., GM and KEISEI EL go up and down completely randomly.

Pair Corralation between GM and KEISEI EL

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.02 times more return on investment than KEISEI EL. However, GM is 1.02 times more volatile than KEISEI EL RAILWAY. It trades about 0.06 of its potential returns per unit of risk. KEISEI EL RAILWAY is currently generating about -0.05 per unit of risk. If you would invest  4,536  in General Motors on September 25, 2024 and sell it today you would earn a total of  645.00  from holding General Motors or generate 14.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy97.66%
ValuesDaily Returns

General Motors  vs.  KEISEI EL RAILWAY

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.
KEISEI EL RAILWAY 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days KEISEI EL RAILWAY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, KEISEI EL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

GM and KEISEI EL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and KEISEI EL

The main advantage of trading using opposite GM and KEISEI EL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, KEISEI EL 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 KEISEI EL will offset losses from the drop in KEISEI EL's long position.
The idea behind General Motors and KEISEI EL RAILWAY 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.
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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