Correlation Between GM and Petroreconcavo
Can any of the company-specific risk be diversified away by investing in both GM and Petroreconcavo 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 Petroreconcavo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Petroreconcavo SA, you can compare the effects of market volatilities on GM and Petroreconcavo 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 Petroreconcavo. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Petroreconcavo.
Diversification Opportunities for GM and Petroreconcavo
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Petroreconcavo is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Petroreconcavo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroreconcavo 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 Petroreconcavo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroreconcavo SA has no effect on the direction of GM i.e., GM and Petroreconcavo go up and down completely randomly.
Pair Corralation between GM and Petroreconcavo
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Petroreconcavo. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.03 times less risky than Petroreconcavo. The stock trades about -0.22 of its potential returns per unit of risk. The Petroreconcavo SA is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 1,616 in Petroreconcavo SA on November 28, 2024 and sell it today you would lose (49.00) from holding Petroreconcavo SA or give up 3.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Petroreconcavo SA
Performance |
| Timeline |
| General Motors |
| Petroreconcavo SA |
GM and Petroreconcavo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Petroreconcavo
The main advantage of trading using opposite GM and Petroreconcavo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Petroreconcavo 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 Petroreconcavo will offset losses from the drop in Petroreconcavo's long position.The idea behind General Motors and Petroreconcavo 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.| Petroreconcavo vs. Petro Rio SA | Petroreconcavo vs. Vamos Locao de | Petroreconcavo vs. SIMPAR SA | Petroreconcavo vs. Ambipar Participaes e |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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