Correlation Between GM and Companhia
Can any of the company-specific risk be diversified away by investing in both GM and Companhia 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 Companhia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Companhia de Saneamento, you can compare the effects of market volatilities on GM and Companhia 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 Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Companhia.
Diversification Opportunities for GM and Companhia
Pay attention - limited upside
The 3 months correlation between GM and Companhia is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of GM i.e., GM and Companhia go up and down completely randomly.
Pair Corralation between GM and Companhia
Allowing for the 90-day total investment horizon GM is expected to generate 1.07 times less return on investment than Companhia. In addition to that, GM is 1.27 times more volatile than Companhia de Saneamento. It trades about 0.05 of its total potential returns per unit of risk. Companhia de Saneamento is currently generating about 0.07 per unit of volatility. If you would invest 316.00 in Companhia de Saneamento on August 26, 2024 and sell it today you would earn a total of 210.00 from holding Companhia de Saneamento or generate 66.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
General Motors vs. Companhia de Saneamento
Performance |
| Timeline |
| General Motors |
| Companhia de Saneamento |
GM and Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Companhia
The main advantage of trading using opposite GM and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Companhia 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 Companhia will offset losses from the drop in Companhia's long position.The idea behind General Motors and Companhia de Saneamento 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.| Companhia vs. CTEEP Companhia | Companhia vs. BB Seguridade Participacoes | Companhia vs. Transmissora Aliana de | Companhia vs. Itasa Investimentos |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |