Correlation Between GM and Matthews Asia
Can any of the company-specific risk be diversified away by investing in both GM and Matthews Asia 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 Matthews Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Matthews Asia Innovators, you can compare the effects of market volatilities on GM and Matthews Asia 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 Matthews Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Matthews Asia.
Diversification Opportunities for GM and Matthews Asia
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Matthews is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Matthews Asia Innovators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Asia Innovators 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 Matthews Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Asia Innovators has no effect on the direction of GM i.e., GM and Matthews Asia go up and down completely randomly.
Pair Corralation between GM and Matthews Asia
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.67 times more return on investment than Matthews Asia. However, GM is 1.67 times more volatile than Matthews Asia Innovators. It trades about 0.07 of its potential returns per unit of risk. Matthews Asia Innovators is currently generating about 0.03 per unit of risk. If you would invest 3,568 in General Motors on August 24, 2024 and sell it today you would earn a total of 2,285 from holding General Motors or generate 64.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Matthews Asia Innovators
Performance |
| Timeline |
| General Motors |
| Matthews Asia Innovators |
GM and Matthews Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Matthews Asia
The main advantage of trading using opposite GM and Matthews Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Matthews Asia 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 Matthews Asia will offset losses from the drop in Matthews Asia's long position.The idea behind General Motors and Matthews Asia Innovators 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.| Matthews Asia vs. Matthews China Active | Matthews Asia vs. MAYBANK EMERGING ETF | Matthews Asia vs. Matthews Emerging Markets | Matthews Asia vs. JP Morgan Exchange Traded |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |