Correlation Between GM and Nippon Paint
Can any of the company-specific risk be diversified away by investing in both GM and Nippon Paint 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 Nippon Paint into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nippon Paint Holdings, you can compare the effects of market volatilities on GM and Nippon Paint 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 Nippon Paint. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nippon Paint.
Diversification Opportunities for GM and Nippon Paint
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Nippon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nippon Paint Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Paint Holdings 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 Nippon Paint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Paint Holdings has no effect on the direction of GM i.e., GM and Nippon Paint go up and down completely randomly.
Pair Corralation between GM and Nippon Paint
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.53 times more return on investment than Nippon Paint. However, General Motors is 1.9 times less risky than Nippon Paint. It trades about 0.06 of its potential returns per unit of risk. Nippon Paint Holdings is currently generating about 0.01 per unit of risk. If you would invest 3,263 in General Motors on September 14, 2024 and sell it today you would earn a total of 1,997 from holding General Motors or generate 61.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 74.34% |
| Values | Daily Returns |
General Motors vs. Nippon Paint Holdings
Performance |
| Timeline |
| General Motors |
| Nippon Paint Holdings |
GM and Nippon Paint Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nippon Paint
The main advantage of trading using opposite GM and Nippon Paint positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nippon Paint 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 Nippon Paint will offset losses from the drop in Nippon Paint's long position.The idea behind General Motors and Nippon Paint Holdings 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.| Nippon Paint vs. Delek Logistics Partners | Nippon Paint vs. Pentair PLC | Nippon Paint vs. TFI International | Nippon Paint vs. Yuexiu Transport Infrastructure |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Transaction History View history of all your transactions and understand their impact on performance |