Correlation Between GM and Sit International
Can any of the company-specific risk be diversified away by investing in both GM and Sit International 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 Sit International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sit International Equity, you can compare the effects of market volatilities on GM and Sit International 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 Sit International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sit International.
Diversification Opportunities for GM and Sit International
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Sit is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sit International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit International Equity 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 Sit International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit International Equity has no effect on the direction of GM i.e., GM and Sit International go up and down completely randomly.
Pair Corralation between GM and Sit International
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.77 times more return on investment than Sit International. However, GM is 2.77 times more volatile than Sit International Equity. It trades about 0.09 of its potential returns per unit of risk. Sit International Equity is currently generating about 0.06 per unit of risk. If you would invest 3,292 in General Motors on August 29, 2024 and sell it today you would earn a total of 2,258 from holding General Motors or generate 68.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Sit International Equity
Performance |
| Timeline |
| General Motors |
| Sit International Equity |
GM and Sit International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sit International
The main advantage of trading using opposite GM and Sit International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sit International 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 Sit International will offset losses from the drop in Sit International's long position.The idea behind General Motors and Sit International Equity 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.| Sit International vs. Sit Emerging Markets | Sit International vs. Simt E Fixed | Sit International vs. Simt Multi Asset Income | Sit International vs. Simt Global Managed |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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