Correlation Between GM and Mondi PLC
Can any of the company-specific risk be diversified away by investing in both GM and Mondi PLC 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 Mondi PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Mondi PLC ADR, you can compare the effects of market volatilities on GM and Mondi PLC 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 Mondi PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mondi PLC.
Diversification Opportunities for GM and Mondi PLC
Pay attention - limited upside
The 3 months correlation between GM and Mondi is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mondi PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondi PLC 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 Mondi PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondi PLC ADR has no effect on the direction of GM i.e., GM and Mondi PLC go up and down completely randomly.
Pair Corralation between GM and Mondi PLC
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.7 times more return on investment than Mondi PLC. However, GM is 1.7 times more volatile than Mondi PLC ADR. It trades about 0.07 of its potential returns per unit of risk. Mondi PLC ADR is currently generating about -0.26 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Mondi PLC ADR
Performance |
| Timeline |
| General Motors |
| Mondi PLC ADR |
GM and Mondi PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Mondi PLC
The main advantage of trading using opposite GM and Mondi PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Mondi PLC 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 Mondi PLC will offset losses from the drop in Mondi PLC's long position.The idea behind General Motors and Mondi PLC 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.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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
Other Complementary Tools
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |