Correlation Between GM and Seven I
Can any of the company-specific risk be diversified away by investing in both GM and Seven I 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 Seven I into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Seven i Holdings, you can compare the effects of market volatilities on GM and Seven I 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 Seven I. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Seven I.
Diversification Opportunities for GM and Seven I
Very weak diversification
The 3 months correlation between GM and Seven is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Seven i Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven i Holdings 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 Seven I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven i Holdings has no effect on the direction of GM i.e., GM and Seven I go up and down completely randomly.
Pair Corralation between GM and Seven I
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.72 times more return on investment than Seven I. However, General Motors is 1.39 times less risky than Seven I. It trades about 0.09 of its potential returns per unit of risk. Seven i Holdings is currently generating about 0.05 per unit of risk. If you would invest 4,044 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,515 from holding General Motors or generate 37.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.92% |
| Values | Daily Returns |
General Motors vs. Seven i Holdings
Performance |
| Timeline |
| General Motors |
| Seven i Holdings |
GM and Seven I Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Seven I
The main advantage of trading using opposite GM and Seven I positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Seven I 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 Seven I will offset losses from the drop in Seven I's long position.The idea behind General Motors and Seven i Holdings 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.| Seven I vs. TESCO PLC LS 0633333 | Seven I vs. Superior Plus Corp | Seven I vs. NMI Holdings | Seven I vs. Origin Agritech |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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