Correlation Between GM and Novina SA
Can any of the company-specific risk be diversified away by investing in both GM and Novina 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 Novina 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 Novina SA, you can compare the effects of market volatilities on GM and Novina 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 Novina SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Novina SA.
Diversification Opportunities for GM and Novina SA
Weak diversification
The 3 months correlation between GM and Novina is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Novina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novina 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 Novina SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novina SA has no effect on the direction of GM i.e., GM and Novina SA go up and down completely randomly.
Pair Corralation between GM and Novina SA
Allowing for the 90-day total investment horizon GM is expected to generate 3.55 times less return on investment than Novina SA. But when comparing it to its historical volatility, General Motors is 3.89 times less risky than Novina SA. It trades about 0.07 of its potential returns per unit of risk. Novina SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 48.00 in Novina SA on August 31, 2024 and sell it today you would earn a total of 67.00 from holding Novina SA or generate 139.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
General Motors vs. Novina SA
Performance |
| Timeline |
| General Motors |
| Novina SA |
GM and Novina SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Novina SA
The main advantage of trading using opposite GM and Novina SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Novina 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 Novina SA will offset losses from the drop in Novina SA's long position.The idea behind General Motors and Novina 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.| Novina SA vs. Banco Santander SA | Novina SA vs. UniCredit SpA | Novina SA vs. CEZ as | Novina SA vs. Polski Koncern Naftowy |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |