Correlation Between GM and Resqunit
Can any of the company-specific risk be diversified away by investing in both GM and Resqunit 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 Resqunit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Resqunit AB, you can compare the effects of market volatilities on GM and Resqunit 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 Resqunit. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Resqunit.
Diversification Opportunities for GM and Resqunit
Excellent diversification
The 3 months correlation between GM and Resqunit is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Resqunit AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resqunit AB 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 Resqunit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resqunit AB has no effect on the direction of GM i.e., GM and Resqunit go up and down completely randomly.
Pair Corralation between GM and Resqunit
Allowing for the 90-day total investment horizon GM is expected to generate 11.05 times less return on investment than Resqunit. But when comparing it to its historical volatility, General Motors is 12.56 times less risky than Resqunit. It trades about 0.12 of its potential returns per unit of risk. Resqunit AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 30.00 in Resqunit AB on September 4, 2024 and sell it today you would lose (10.00) from holding Resqunit AB or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Resqunit AB
Performance |
| Timeline |
| General Motors |
| Resqunit AB |
GM and Resqunit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Resqunit
The main advantage of trading using opposite GM and Resqunit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Resqunit 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 Resqunit will offset losses from the drop in Resqunit's long position.The idea behind General Motors and Resqunit AB 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.| Resqunit vs. ZAZZ Energy of | Resqunit vs. Triboron International AB | Resqunit vs. NCAB Group | Resqunit vs. Vimian Group AB |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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