Correlation Between GM and Sekar Bumi
Can any of the company-specific risk be diversified away by investing in both GM and Sekar Bumi 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 Sekar Bumi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sekar Bumi Tbk, you can compare the effects of market volatilities on GM and Sekar Bumi 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 Sekar Bumi. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sekar Bumi.
Diversification Opportunities for GM and Sekar Bumi
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Sekar is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sekar Bumi Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekar Bumi Tbk 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 Sekar Bumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekar Bumi Tbk has no effect on the direction of GM i.e., GM and Sekar Bumi go up and down completely randomly.
Pair Corralation between GM and Sekar Bumi
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.84 times more return on investment than Sekar Bumi. However, GM is 1.84 times more volatile than Sekar Bumi Tbk. It trades about 0.17 of its potential returns per unit of risk. Sekar Bumi Tbk is currently generating about -0.25 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Sekar Bumi Tbk
Performance |
| Timeline |
| General Motors |
| Sekar Bumi Tbk |
GM and Sekar Bumi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sekar Bumi
The main advantage of trading using opposite GM and Sekar Bumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sekar Bumi 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 Sekar Bumi will offset losses from the drop in Sekar Bumi's long position.The idea behind General Motors and Sekar Bumi Tbk 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.| Sekar Bumi vs. Bank BRISyariah Tbk | Sekar Bumi vs. Mitra Pinasthika Mustika | Sekar Bumi vs. Jakarta Int Hotels | Sekar Bumi vs. Indosterling Technomedia Tbk |
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 CEOs Directory module to screen CEOs from public companies around the world.
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