Correlation Between GM and SBI Holdings
Can any of the company-specific risk be diversified away by investing in both GM and SBI Holdings 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 SBI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and SBI Holdings, you can compare the effects of market volatilities on GM and SBI Holdings 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 SBI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SBI Holdings.
Diversification Opportunities for GM and SBI Holdings
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and SBI is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SBI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI 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 SBI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Holdings has no effect on the direction of GM i.e., GM and SBI Holdings go up and down completely randomly.
Pair Corralation between GM and SBI Holdings
Allowing for the 90-day total investment horizon GM is expected to generate 1.07 times less return on investment than SBI Holdings. But when comparing it to its historical volatility, General Motors is 1.56 times less risky than SBI Holdings. It trades about 0.32 of its potential returns per unit of risk. SBI Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,100 in SBI Holdings on August 27, 2024 and sell it today you would earn a total of 307.00 from holding SBI Holdings or generate 14.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. SBI Holdings
Performance |
| Timeline |
| General Motors |
| SBI Holdings |
GM and SBI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and SBI Holdings
The main advantage of trading using opposite GM and SBI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, SBI Holdings 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 SBI Holdings will offset losses from the drop in SBI Holdings' long position.The idea behind General Motors and SBI 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.| SBI Holdings vs. Blackstone Group | SBI Holdings vs. BlackRock | SBI Holdings vs. Apollo Global Management | SBI Holdings vs. Bank of New |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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