Correlation Between GM and Singapore Technologies
Can any of the company-specific risk be diversified away by investing in both GM and Singapore Technologies 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 Singapore Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Singapore Technologies Engineering, you can compare the effects of market volatilities on GM and Singapore Technologies 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 Singapore Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Singapore Technologies.
Diversification Opportunities for GM and Singapore Technologies
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Singapore is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Singapore Technologies Enginee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Technologies 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 Singapore Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Technologies has no effect on the direction of GM i.e., GM and Singapore Technologies go up and down completely randomly.
Pair Corralation between GM and Singapore Technologies
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.35 times more return on investment than Singapore Technologies. However, GM is 1.35 times more volatile than Singapore Technologies Engineering. It trades about 0.14 of its potential returns per unit of risk. Singapore Technologies Engineering is currently generating about -0.14 per unit of risk. If you would invest 5,180 in General Motors on September 3, 2024 and sell it today you would earn a total of 379.00 from holding General Motors or generate 7.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Singapore Technologies Enginee
Performance |
| Timeline |
| General Motors |
| Singapore Technologies |
GM and Singapore Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Singapore Technologies
The main advantage of trading using opposite GM and Singapore Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Singapore Technologies 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 Singapore Technologies will offset losses from the drop in Singapore Technologies' long position.The idea behind General Motors and Singapore Technologies Engineering 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.| Singapore Technologies vs. Airbus Group SE | Singapore Technologies vs. Safran SA | Singapore Technologies vs. Embraer SA ADR | Singapore Technologies vs. BAE Systems PLC |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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