Correlation Between GM and Sherwood Public
Can any of the company-specific risk be diversified away by investing in both GM and Sherwood Public 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 Sherwood Public into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sherwood Public, you can compare the effects of market volatilities on GM and Sherwood Public 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 Sherwood Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sherwood Public.
Diversification Opportunities for GM and Sherwood Public
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Sherwood is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sherwood Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherwood Public 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 Sherwood Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherwood Public has no effect on the direction of GM i.e., GM and Sherwood Public go up and down completely randomly.
Pair Corralation between GM and Sherwood Public
Allowing for the 90-day total investment horizon GM is expected to generate 35.01 times less return on investment than Sherwood Public. But when comparing it to its historical volatility, General Motors is 37.56 times less risky than Sherwood Public. It trades about 0.08 of its potential returns per unit of risk. Sherwood Public is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 314.00 in Sherwood Public on September 3, 2024 and sell it today you would lose (10.00) from holding Sherwood Public or give up 3.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.18% |
| Values | Daily Returns |
General Motors vs. Sherwood Public
Performance |
| Timeline |
| General Motors |
| Sherwood Public |
GM and Sherwood Public Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sherwood Public
The main advantage of trading using opposite GM and Sherwood Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sherwood Public 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 Sherwood Public will offset losses from the drop in Sherwood Public's long position.The idea behind General Motors and Sherwood Public 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.| Sherwood Public vs. PTT Public | Sherwood Public vs. The Siam Commercial | Sherwood Public vs. Airports of Thailand | Sherwood Public vs. CP ALL Public |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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