Correlation Between GM and Ping An
Can any of the company-specific risk be diversified away by investing in both GM and Ping An 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 Ping An into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Ping An Insurance, you can compare the effects of market volatilities on GM and Ping An 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 Ping An. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ping An.
Diversification Opportunities for GM and Ping An
Modest diversification
The 3 months correlation between GM and Ping is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ping An Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ping An Insurance 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 Ping An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ping An Insurance has no effect on the direction of GM i.e., GM and Ping An go up and down completely randomly.
Pair Corralation between GM and Ping An
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.19 times more return on investment than Ping An. However, GM is 2.19 times more volatile than Ping An Insurance. It trades about 0.12 of its potential returns per unit of risk. Ping An Insurance is currently generating about -0.37 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 Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Ping An Insurance
Performance |
| Timeline |
| General Motors |
| Ping An Insurance |
GM and Ping An Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Ping An
The main advantage of trading using opposite GM and Ping An positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Ping An 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 Ping An will offset losses from the drop in Ping An's long position.The idea behind General Motors and Ping An Insurance 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.| Ping An vs. AIA Group Ltd | Ping An vs. China Life Insurance | Ping An vs. Sanlam Ltd PK | Ping An vs. Lincoln National |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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