Correlation Between GM and Seiko Epson
Can any of the company-specific risk be diversified away by investing in both GM and Seiko Epson 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 Seiko Epson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Seiko Epson, you can compare the effects of market volatilities on GM and Seiko Epson 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 Seiko Epson. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Seiko Epson.
Diversification Opportunities for GM and Seiko Epson
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Seiko is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Seiko Epson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seiko Epson 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 Seiko Epson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seiko Epson has no effect on the direction of GM i.e., GM and Seiko Epson go up and down completely randomly.
Pair Corralation between GM and Seiko Epson
Allowing for the 90-day total investment horizon GM is expected to generate 5.91 times less return on investment than Seiko Epson. But when comparing it to its historical volatility, General Motors is 1.47 times less risky than Seiko Epson. It trades about 0.03 of its potential returns per unit of risk. Seiko Epson is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,263 in Seiko Epson on November 9, 2024 and sell it today you would earn a total of 462.00 from holding Seiko Epson or generate 36.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 21.7% |
| Values | Daily Returns |
General Motors vs. Seiko Epson
Performance |
| Timeline |
| General Motors |
| Seiko Epson |
GM and Seiko Epson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Seiko Epson
The main advantage of trading using opposite GM and Seiko Epson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Seiko Epson 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 Seiko Epson will offset losses from the drop in Seiko Epson's long position.The idea behind General Motors and Seiko Epson 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.| Seiko Epson vs. Quantum Computing | Seiko Epson vs. Rigetti Computing | Seiko Epson vs. D Wave Quantum | Seiko Epson vs. Red Cat Holdings |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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