Correlation Between GM and SECITS Holding
Can any of the company-specific risk be diversified away by investing in both GM and SECITS Holding 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 SECITS Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and SECITS Holding AB, you can compare the effects of market volatilities on GM and SECITS Holding 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 SECITS Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SECITS Holding.
Diversification Opportunities for GM and SECITS Holding
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and SECITS is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SECITS Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SECITS Holding AB 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 SECITS Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SECITS Holding AB has no effect on the direction of GM i.e., GM and SECITS Holding go up and down completely randomly.
Pair Corralation between GM and SECITS Holding
Allowing for the 90-day total investment horizon GM is expected to generate 2.48 times less return on investment than SECITS Holding. But when comparing it to its historical volatility, General Motors is 5.8 times less risky than SECITS Holding. It trades about 0.17 of its potential returns per unit of risk. SECITS Holding AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2.00 in SECITS Holding AB on September 1, 2024 and sell it today you would earn a total of 0.04 from holding SECITS Holding AB or generate 2.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
General Motors vs. SECITS Holding AB
Performance |
| Timeline |
| General Motors |
| SECITS Holding AB |
GM and SECITS Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and SECITS Holding
The main advantage of trading using opposite GM and SECITS Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, SECITS Holding 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 SECITS Holding will offset losses from the drop in SECITS Holding's long position.The idea behind General Motors and SECITS Holding AB 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.| SECITS Holding vs. DevPort AB | SECITS Holding vs. B3 Consulting Group | SECITS Holding vs. Micro Systemation AB |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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