Correlation Between GM and Southern Concrete
Can any of the company-specific risk be diversified away by investing in both GM and Southern Concrete 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 Southern Concrete into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Southern Concrete Pile, you can compare the effects of market volatilities on GM and Southern Concrete 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 Southern Concrete. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Southern Concrete.
Diversification Opportunities for GM and Southern Concrete
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Southern is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Southern Concrete Pile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Concrete Pile 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 Southern Concrete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Concrete Pile has no effect on the direction of GM i.e., GM and Southern Concrete go up and down completely randomly.
Pair Corralation between GM and Southern Concrete
Allowing for the 90-day total investment horizon GM is expected to generate 19.97 times less return on investment than Southern Concrete. But when comparing it to its historical volatility, General Motors is 21.87 times less risky than Southern Concrete. It trades about 0.05 of its potential returns per unit of risk. Southern Concrete Pile is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 454.00 in Southern Concrete Pile on August 29, 2024 and sell it today you would earn a total of 226.00 from holding Southern Concrete Pile or generate 49.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.97% |
| Values | Daily Returns |
General Motors vs. Southern Concrete Pile
Performance |
| Timeline |
| General Motors |
| Southern Concrete Pile |
GM and Southern Concrete Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Southern Concrete
The main advantage of trading using opposite GM and Southern Concrete positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Southern Concrete 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 Southern Concrete will offset losses from the drop in Southern Concrete's long position.The idea behind General Motors and Southern Concrete Pile 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.| Southern Concrete vs. Quality Houses Public | Southern Concrete vs. Siam City Cement | Southern Concrete vs. SC Asset | Southern Concrete vs. Siam Steel Service |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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