Correlation Between GM and Wetzel SA
Can any of the company-specific risk be diversified away by investing in both GM and Wetzel SA 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 Wetzel SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Wetzel SA, you can compare the effects of market volatilities on GM and Wetzel SA 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 Wetzel SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Wetzel SA.
Diversification Opportunities for GM and Wetzel SA
Poor diversification
The 3 months correlation between GM and Wetzel is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Wetzel SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wetzel SA 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 Wetzel SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wetzel SA has no effect on the direction of GM i.e., GM and Wetzel SA go up and down completely randomly.
Pair Corralation between GM and Wetzel SA
Allowing for the 90-day total investment horizon GM is expected to generate 24.8 times less return on investment than Wetzel SA. But when comparing it to its historical volatility, General Motors is 5.48 times less risky than Wetzel SA. It trades about 0.06 of its potential returns per unit of risk. Wetzel SA is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 880.00 in Wetzel SA on August 23, 2024 and sell it today you would earn a total of 517.00 from holding Wetzel SA or generate 58.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
General Motors vs. Wetzel SA
Performance |
| Timeline |
| General Motors |
| Wetzel SA |
GM and Wetzel SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Wetzel SA
The main advantage of trading using opposite GM and Wetzel SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Wetzel SA 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 Wetzel SA will offset losses from the drop in Wetzel SA's long position.The idea behind General Motors and Wetzel SA 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.| Wetzel SA vs. Recrusul SA | Wetzel SA vs. Mangels Industrial SA | Wetzel SA vs. Inepar SA Indstria | Wetzel SA vs. Lupatech SA |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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