Correlation Between GM and RHI MAGNESITA
Can any of the company-specific risk be diversified away by investing in both GM and RHI MAGNESITA 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 RHI MAGNESITA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and RHI MAGNESITA INDIA, you can compare the effects of market volatilities on GM and RHI MAGNESITA 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 RHI MAGNESITA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and RHI MAGNESITA.
Diversification Opportunities for GM and RHI MAGNESITA
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and RHI is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and RHI MAGNESITA INDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RHI MAGNESITA INDIA 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 RHI MAGNESITA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RHI MAGNESITA INDIA has no effect on the direction of GM i.e., GM and RHI MAGNESITA go up and down completely randomly.
Pair Corralation between GM and RHI MAGNESITA
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.26 times more return on investment than RHI MAGNESITA. However, GM is 1.26 times more volatile than RHI MAGNESITA INDIA. It trades about 0.04 of its potential returns per unit of risk. RHI MAGNESITA INDIA is currently generating about -0.09 per unit of risk. If you would invest 4,788 in General Motors on September 22, 2024 and sell it today you would earn a total of 393.00 from holding General Motors or generate 8.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. RHI MAGNESITA INDIA
Performance |
| Timeline |
| General Motors |
| RHI MAGNESITA INDIA |
GM and RHI MAGNESITA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and RHI MAGNESITA
The main advantage of trading using opposite GM and RHI MAGNESITA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, RHI MAGNESITA 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 RHI MAGNESITA will offset losses from the drop in RHI MAGNESITA's long position.The idea behind General Motors and RHI MAGNESITA INDIA 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.| RHI MAGNESITA vs. WESTLIFE FOODWORLD LIMITED | RHI MAGNESITA vs. Aarti Drugs Limited | RHI MAGNESITA vs. Kohinoor Foods Limited | RHI MAGNESITA vs. Sapphire Foods India |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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