Correlation Between GM and Platinum Asia
Can any of the company-specific risk be diversified away by investing in both GM and Platinum Asia 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 Platinum Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Platinum Asia Investments, you can compare the effects of market volatilities on GM and Platinum Asia 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 Platinum Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Platinum Asia.
Diversification Opportunities for GM and Platinum Asia
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Platinum is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Platinum Asia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Asia Investments 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 Platinum Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Asia Investments has no effect on the direction of GM i.e., GM and Platinum Asia go up and down completely randomly.
Pair Corralation between GM and Platinum Asia
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.22 times more return on investment than Platinum Asia. However, GM is 2.22 times more volatile than Platinum Asia Investments. It trades about 0.07 of its potential returns per unit of risk. Platinum Asia Investments is currently generating about -0.31 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Platinum Asia Investments
Performance |
| Timeline |
| General Motors |
| Platinum Asia Investments |
GM and Platinum Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Platinum Asia
The main advantage of trading using opposite GM and Platinum Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Platinum Asia 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 Platinum Asia will offset losses from the drop in Platinum Asia's long position.The idea behind General Motors and Platinum Asia Investments 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.| Platinum Asia vs. Stelar Metals | Platinum Asia vs. Centaurus Metals | Platinum Asia vs. Perseus Mining | Platinum Asia vs. Regal Funds Management |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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