Correlation Between GM and Paramount Spinning
Can any of the company-specific risk be diversified away by investing in both GM and Paramount Spinning 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 Paramount Spinning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Paramount Spinning Mills, you can compare the effects of market volatilities on GM and Paramount Spinning 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 Paramount Spinning. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Paramount Spinning.
Diversification Opportunities for GM and Paramount Spinning
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Paramount is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Paramount Spinning Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Spinning Mills 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 Paramount Spinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Spinning Mills has no effect on the direction of GM i.e., GM and Paramount Spinning go up and down completely randomly.
Pair Corralation between GM and Paramount Spinning
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Paramount Spinning. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.12 times less risky than Paramount Spinning. The stock trades about -0.32 of its potential returns per unit of risk. The Paramount Spinning Mills is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 480.00 in Paramount Spinning Mills on November 28, 2024 and sell it today you would lose (60.00) from holding Paramount Spinning Mills or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
General Motors vs. Paramount Spinning Mills
Performance |
| Timeline |
| General Motors |
| Paramount Spinning Mills |
GM and Paramount Spinning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Paramount Spinning
The main advantage of trading using opposite GM and Paramount Spinning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Paramount Spinning 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 Paramount Spinning will offset losses from the drop in Paramount Spinning's long position.The idea behind General Motors and Paramount Spinning Mills 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.| Paramount Spinning vs. Habib Insurance | Paramount Spinning vs. Ghandhara Automobile | Paramount Spinning vs. Shadab Textile Mills | Paramount Spinning vs. Century Insurance |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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