Correlation Between GM and Security Bank
Can any of the company-specific risk be diversified away by investing in both GM and Security Bank 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 Security Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Security Bank Corp, you can compare the effects of market volatilities on GM and Security Bank 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 Security Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Security Bank.
Diversification Opportunities for GM and Security Bank
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Security is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Security Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security Bank Corp 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 Security Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security Bank Corp has no effect on the direction of GM i.e., GM and Security Bank go up and down completely randomly.
Pair Corralation between GM and Security Bank
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.26 times more return on investment than Security Bank. However, GM is 1.26 times more volatile than Security Bank Corp. It trades about 0.04 of its potential returns per unit of risk. Security Bank Corp is currently generating about -0.02 per unit of risk. If you would invest 3,154 in General Motors on January 15, 2025 and sell it today you would earn a total of 1,360 from holding General Motors or generate 43.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.37% |
| Values | Daily Returns |
General Motors vs. Security Bank Corp
Performance |
| Timeline |
| General Motors |
| Security Bank Corp |
GM and Security Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Security Bank
The main advantage of trading using opposite GM and Security Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Security Bank 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 Security Bank will offset losses from the drop in Security Bank's long position.The idea behind General Motors and Security Bank Corp 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.| Security Bank vs. Rizal Commercial Banking | Security Bank vs. Converge Information Communications | Security Bank vs. Philippine Business Bank | Security Bank vs. National Reinsurance |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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