Correlation Between GM and Nova Lifestyle
Can any of the company-specific risk be diversified away by investing in both GM and Nova Lifestyle 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 Nova Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nova Lifestyle I, you can compare the effects of market volatilities on GM and Nova Lifestyle 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 Nova Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nova Lifestyle.
Diversification Opportunities for GM and Nova Lifestyle
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Nova is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nova Lifestyle I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Lifestyle I 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 Nova Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Lifestyle I has no effect on the direction of GM i.e., GM and Nova Lifestyle go up and down completely randomly.
Pair Corralation between GM and Nova Lifestyle
Allowing for the 90-day total investment horizon GM is expected to generate 1.31 times less return on investment than Nova Lifestyle. But when comparing it to its historical volatility, General Motors is 5.72 times less risky than Nova Lifestyle. It trades about 0.05 of its potential returns per unit of risk. Nova Lifestyle I is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 259.00 in Nova Lifestyle I on August 27, 2024 and sell it today you would lose (198.00) from holding Nova Lifestyle I or give up 76.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.19% |
| Values | Daily Returns |
General Motors vs. Nova Lifestyle I
Performance |
| Timeline |
| General Motors |
| Nova Lifestyle I |
GM and Nova Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nova Lifestyle
The main advantage of trading using opposite GM and Nova Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nova Lifestyle 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 Nova Lifestyle will offset losses from the drop in Nova Lifestyle's long position.The idea behind General Motors and Nova Lifestyle I 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |