Correlation Between GM and Sinopec Kantons
Can any of the company-specific risk be diversified away by investing in both GM and Sinopec Kantons 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 Sinopec Kantons into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sinopec Kantons Holdings, you can compare the effects of market volatilities on GM and Sinopec Kantons 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 Sinopec Kantons. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sinopec Kantons.
Diversification Opportunities for GM and Sinopec Kantons
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Sinopec is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sinopec Kantons Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Kantons 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 Sinopec Kantons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Kantons Holdings has no effect on the direction of GM i.e., GM and Sinopec Kantons go up and down completely randomly.
Pair Corralation between GM and Sinopec Kantons
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.28 times more return on investment than Sinopec Kantons. However, GM is 1.28 times more volatile than Sinopec Kantons Holdings. It trades about -0.1 of its potential returns per unit of risk. Sinopec Kantons Holdings is currently generating about -0.17 per unit of risk. If you would invest 4,790 in General Motors on December 4, 2024 and sell it today you would lose (208.00) from holding General Motors or give up 4.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Sinopec Kantons Holdings
Performance |
| Timeline |
| General Motors |
| Sinopec Kantons Holdings |
GM and Sinopec Kantons Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sinopec Kantons
The main advantage of trading using opposite GM and Sinopec Kantons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sinopec Kantons 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 Sinopec Kantons will offset losses from the drop in Sinopec Kantons' long position.The idea behind General Motors and Sinopec Kantons 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.| Sinopec Kantons vs. SBA Communications Corp | Sinopec Kantons vs. NORTHEAST UTILITIES | Sinopec Kantons vs. Entravision Communications | Sinopec Kantons vs. Spirent Communications plc |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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