Correlation Between GM and Seven Arts
Can any of the company-specific risk be diversified away by investing in both GM and Seven Arts 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 Arts 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 Arts Entertainment, you can compare the effects of market volatilities on GM and Seven Arts 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 Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Seven Arts.
Diversification Opportunities for GM and Seven Arts
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Seven is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Seven Arts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven Arts Entertainment 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 Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven Arts Entertainment has no effect on the direction of GM i.e., GM and Seven Arts go up and down completely randomly.
Pair Corralation between GM and Seven Arts
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Seven Arts. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 8.65 times less risky than Seven Arts. The stock trades about -0.09 of its potential returns per unit of risk. The Seven Arts Entertainment is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.03 in Seven Arts Entertainment on November 9, 2024 and sell it today you would earn a total of 0.00 from holding Seven Arts Entertainment or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Seven Arts Entertainment
Performance |
| Timeline |
| General Motors |
| Seven Arts Entertainment |
GM and Seven Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Seven Arts
The main advantage of trading using opposite GM and Seven Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Seven Arts 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 Arts will offset losses from the drop in Seven Arts' long position.The idea behind General Motors and Seven Arts Entertainment 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 Arts vs. JPX Global | Seven Arts vs. Intl Star | Seven Arts vs. Indo Global Exchange | Seven Arts vs. Active Health Foods |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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