Correlation Between GM and Sands Capital
Can any of the company-specific risk be diversified away by investing in both GM and Sands Capital 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 Sands Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sands Capital Global, you can compare the effects of market volatilities on GM and Sands Capital 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 Sands Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sands Capital.
Diversification Opportunities for GM and Sands Capital
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Sands is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sands Capital Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sands Capital Global 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 Sands Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sands Capital Global has no effect on the direction of GM i.e., GM and Sands Capital go up and down completely randomly.
Pair Corralation between GM and Sands Capital
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Sands Capital. In addition to that, GM is 1.51 times more volatile than Sands Capital Global. It trades about -0.09 of its total potential returns per unit of risk. Sands Capital Global is currently generating about -0.05 per unit of volatility. If you would invest 3,128 in Sands Capital Global on November 29, 2024 and sell it today you would lose (39.00) from holding Sands Capital Global or give up 1.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Sands Capital Global
Performance |
| Timeline |
| General Motors |
| Sands Capital Global |
GM and Sands Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sands Capital
The main advantage of trading using opposite GM and Sands Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sands Capital 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 Sands Capital will offset losses from the drop in Sands Capital's long position.The idea behind General Motors and Sands Capital Global 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.| Sands Capital vs. Sands Capital Global | Sands Capital vs. American Beacon Sga | Sands Capital vs. Amg Timessquare International | Sands Capital vs. Ab Large Cap |
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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