Correlation Between GM and NGK Insulators
Can any of the company-specific risk be diversified away by investing in both GM and NGK Insulators 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 NGK Insulators into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and NGK Insulators, you can compare the effects of market volatilities on GM and NGK Insulators 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 NGK Insulators. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and NGK Insulators.
Diversification Opportunities for GM and NGK Insulators
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and NGK is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NGK Insulators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGK Insulators 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 NGK Insulators. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGK Insulators has no effect on the direction of GM i.e., GM and NGK Insulators go up and down completely randomly.
Pair Corralation between GM and NGK Insulators
If you would invest 5,180 in General Motors on September 5, 2024 and sell it today you would earn a total of 156.00 from holding General Motors or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. NGK Insulators
Performance |
| Timeline |
| General Motors |
| NGK Insulators |
GM and NGK Insulators Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and NGK Insulators
The main advantage of trading using opposite GM and NGK Insulators positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, NGK Insulators 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 NGK Insulators will offset losses from the drop in NGK Insulators' long position.The idea behind General Motors and NGK Insulators 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.| NGK Insulators vs. Dear Cashmere Holding | NGK Insulators vs. Goff Corp | NGK Insulators vs. Wialan Technologies | NGK Insulators vs. Cgrowth Capital |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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