Correlation Between GM and SES SA
Can any of the company-specific risk be diversified away by investing in both GM and SES SA 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 SES SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and SES SA, you can compare the effects of market volatilities on GM and SES SA 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 SES SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SES SA.
Diversification Opportunities for GM and SES SA
Very good diversification
The 3 months correlation between GM and SES is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SES SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SES SA 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 SES SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SES SA has no effect on the direction of GM i.e., GM and SES SA go up and down completely randomly.
Pair Corralation between GM and SES SA
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the SES SA. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.33 times less risky than SES SA. The stock trades about -0.01 of its potential returns per unit of risk. The SES SA is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 310.00 in SES SA on December 1, 2024 and sell it today you would earn a total of 115.00 from holding SES SA or generate 37.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. SES SA
Performance |
| Timeline |
| General Motors |
| SES SA |
GM and SES SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and SES SA
The main advantage of trading using opposite GM and SES SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, SES SA 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 SES SA will offset losses from the drop in SES SA's long position.The idea behind General Motors and SES SA 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.| SES SA vs. BII Railway Transportation | SES SA vs. SPORTING | SES SA vs. GUILD ESPORTS PLC | SES SA vs. EMPEROR ENT HOTEL |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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