Correlation Between GM and Salient International
Can any of the company-specific risk be diversified away by investing in both GM and Salient International 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 Salient International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Salient International Real, you can compare the effects of market volatilities on GM and Salient International 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 Salient International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Salient International.
Diversification Opportunities for GM and Salient International
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Salient is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Salient International Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient International 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 Salient International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient International has no effect on the direction of GM i.e., GM and Salient International go up and down completely randomly.
Pair Corralation between GM and Salient International
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.92 times more return on investment than Salient International. However, GM is 2.92 times more volatile than Salient International Real. It trades about 0.09 of its potential returns per unit of risk. Salient International Real is currently generating about 0.11 per unit of risk. If you would invest 4,476 in General Motors on August 29, 2024 and sell it today you would earn a total of 1,074 from holding General Motors or generate 23.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Salient International Real
Performance |
| Timeline |
| General Motors |
| Salient International |
GM and Salient International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Salient International
The main advantage of trading using opposite GM and Salient International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Salient International 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 Salient International will offset losses from the drop in Salient International's long position.The idea behind General Motors and Salient International Real 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.| Salient International vs. HUMANA INC | Salient International vs. Aquagold International | Salient International vs. Barloworld Ltd ADR | Salient International vs. Morningstar Unconstrained Allocation |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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