Correlation Between GM and SAF Holland
Can any of the company-specific risk be diversified away by investing in both GM and SAF Holland 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 SAF Holland into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and SAF Holland SA, you can compare the effects of market volatilities on GM and SAF Holland 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 SAF Holland. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SAF Holland.
Diversification Opportunities for GM and SAF Holland
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and SAF is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SAF Holland SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAF Holland 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 SAF Holland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAF Holland SA has no effect on the direction of GM i.e., GM and SAF Holland go up and down completely randomly.
Pair Corralation between GM and SAF Holland
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the SAF Holland. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.06 times less risky than SAF Holland. The stock trades about -0.14 of its potential returns per unit of risk. The SAF Holland SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,484 in SAF Holland SA on September 12, 2024 and sell it today you would lose (4.00) from holding SAF Holland SA or give up 0.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. SAF Holland SA
Performance |
| Timeline |
| General Motors |
| SAF Holland SA |
GM and SAF Holland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and SAF Holland
The main advantage of trading using opposite GM and SAF Holland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, SAF Holland 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 SAF Holland will offset losses from the drop in SAF Holland's long position.The idea behind General Motors and SAF Holland 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.| SAF Holland vs. SALESFORCE INC CDR | SAF Holland vs. Carsales | SAF Holland vs. Dairy Farm International | SAF Holland vs. CANON MARKETING JP |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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