Correlation Between GM and Ninety One
Can any of the company-specific risk be diversified away by investing in both GM and Ninety One 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 Ninety One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Ninety One, you can compare the effects of market volatilities on GM and Ninety One 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 Ninety One. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ninety One.
Diversification Opportunities for GM and Ninety One
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Ninety is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ninety One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ninety One 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 Ninety One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ninety One has no effect on the direction of GM i.e., GM and Ninety One go up and down completely randomly.
Pair Corralation between GM and Ninety One
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.65 times more return on investment than Ninety One. However, GM is 2.65 times more volatile than Ninety One. It trades about 0.12 of its potential returns per unit of risk. Ninety One is currently generating about -0.06 per unit of risk. If you would invest 5,197 in General Motors on August 31, 2024 and sell it today you would earn a total of 353.00 from holding General Motors or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. Ninety One
Performance |
| Timeline |
| General Motors |
| Ninety One |
GM and Ninety One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Ninety One
The main advantage of trading using opposite GM and Ninety One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Ninety One 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 Ninety One will offset losses from the drop in Ninety One's long position.The idea behind General Motors and Ninety One 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.| Ninety One vs. RCL Foods | Ninety One vs. Afine Investments | Ninety One vs. Reinet Investments SCA | Ninety One vs. Safari Investments RSA |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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