Correlation Between GM and SCI Electric
Can any of the company-specific risk be diversified away by investing in both GM and SCI Electric 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 SCI Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and SCI Electric Public, you can compare the effects of market volatilities on GM and SCI Electric 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 SCI Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SCI Electric.
Diversification Opportunities for GM and SCI Electric
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and SCI is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SCI Electric Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCI Electric Public 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 SCI Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCI Electric Public has no effect on the direction of GM i.e., GM and SCI Electric go up and down completely randomly.
Pair Corralation between GM and SCI Electric
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the SCI Electric. In addition to that, GM is 1.17 times more volatile than SCI Electric Public. It trades about -0.34 of its total potential returns per unit of risk. SCI Electric Public is currently generating about -0.13 per unit of volatility. If you would invest 87.00 in SCI Electric Public on November 27, 2024 and sell it today you would lose (5.00) from holding SCI Electric Public or give up 5.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. SCI Electric Public
Performance |
| Timeline |
| General Motors |
| SCI Electric Public |
GM and SCI Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and SCI Electric
The main advantage of trading using opposite GM and SCI Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, SCI Electric 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 SCI Electric will offset losses from the drop in SCI Electric's long position.The idea behind General Motors and SCI Electric Public 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.| SCI Electric vs. Star Petroleum Refining | SCI Electric vs. Siri Prime Office | SCI Electric vs. SC Asset | SCI Electric vs. Solartron Public |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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