Correlation Between GM and Orkla ASA
Can any of the company-specific risk be diversified away by investing in both GM and Orkla ASA 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 Orkla ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Orkla ASA, you can compare the effects of market volatilities on GM and Orkla ASA 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 Orkla ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Orkla ASA.
Diversification Opportunities for GM and Orkla ASA
Poor diversification
The 3 months correlation between GM and Orkla is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Orkla ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orkla ASA 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 Orkla ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orkla ASA has no effect on the direction of GM i.e., GM and Orkla ASA go up and down completely randomly.
Pair Corralation between GM and Orkla ASA
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.89 times more return on investment than Orkla ASA. However, General Motors is 1.12 times less risky than Orkla ASA. It trades about 0.07 of its potential returns per unit of risk. Orkla ASA is currently generating about 0.04 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 53.21% |
| Values | Daily Returns |
General Motors vs. Orkla ASA
Performance |
| Timeline |
| General Motors |
| Orkla ASA |
GM and Orkla ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Orkla ASA
The main advantage of trading using opposite GM and Orkla ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Orkla ASA 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 Orkla ASA will offset losses from the drop in Orkla ASA's long position.The idea behind General Motors and Orkla ASA 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.| Orkla ASA vs. The A2 Milk | Orkla ASA vs. Altavoz Entertainment | Orkla ASA vs. Artisan Consumer Goods | Orkla ASA vs. General Mills |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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