Correlation Between GM and Brasilagro Adr
Can any of the company-specific risk be diversified away by investing in both GM and Brasilagro Adr 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 Brasilagro Adr into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Brasilagro Adr, you can compare the effects of market volatilities on GM and Brasilagro Adr 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 Brasilagro Adr. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Brasilagro Adr.
Diversification Opportunities for GM and Brasilagro Adr
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Brasilagro is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Brasilagro Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brasilagro Adr 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 Brasilagro Adr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brasilagro Adr has no effect on the direction of GM i.e., GM and Brasilagro Adr go up and down completely randomly.
Pair Corralation between GM and Brasilagro Adr
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.93 times more return on investment than Brasilagro Adr. However, GM is 1.93 times more volatile than Brasilagro Adr. It trades about 0.13 of its potential returns per unit of risk. Brasilagro Adr is currently generating about -0.06 per unit of risk. If you would invest 5,154 in General Motors on August 30, 2024 and sell it today you would earn a total of 396.00 from holding General Motors or generate 7.68% 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. Brasilagro Adr
Performance |
| Timeline |
| General Motors |
| Brasilagro Adr |
GM and Brasilagro Adr Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Brasilagro Adr
The main advantage of trading using opposite GM and Brasilagro Adr positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Brasilagro Adr 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 Brasilagro Adr will offset losses from the drop in Brasilagro Adr's long position.The idea behind General Motors and Brasilagro Adr 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.| Brasilagro Adr vs. Austevoll Seafood ASA | Brasilagro Adr vs. Golden Agri Resources | Brasilagro Adr vs. SalMar ASA | Brasilagro Adr vs. Wilmar International |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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