Correlation Between GM and PKP Cargo
Can any of the company-specific risk be diversified away by investing in both GM and PKP Cargo 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 PKP Cargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and PKP Cargo SA, you can compare the effects of market volatilities on GM and PKP Cargo 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 PKP Cargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and PKP Cargo.
Diversification Opportunities for GM and PKP Cargo
Pay attention - limited upside
The 3 months correlation between GM and PKP is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and PKP Cargo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKP Cargo SA 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 PKP Cargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKP Cargo SA has no effect on the direction of GM i.e., GM and PKP Cargo go up and down completely randomly.
Pair Corralation between GM and PKP Cargo
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.75 times more return on investment than PKP Cargo. However, General Motors is 1.34 times less risky than PKP Cargo. It trades about 0.05 of its potential returns per unit of risk. PKP Cargo SA is currently generating about 0.0 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,754 from holding General Motors or generate 46.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. PKP Cargo SA
Performance |
| Timeline |
| General Motors |
| PKP Cargo SA |
GM and PKP Cargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and PKP Cargo
The main advantage of trading using opposite GM and PKP Cargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, PKP Cargo 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 PKP Cargo will offset losses from the drop in PKP Cargo's long position.The idea behind General Motors and PKP Cargo SA 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.| PKP Cargo vs. Banco Santander SA | PKP Cargo vs. UniCredit SpA | PKP Cargo vs. CEZ as | PKP Cargo vs. Polski Koncern Naftowy |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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