Correlation Between GM and Softwareone Holding
Can any of the company-specific risk be diversified away by investing in both GM and Softwareone Holding 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 Softwareone Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Softwareone Holding, you can compare the effects of market volatilities on GM and Softwareone Holding 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 Softwareone Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Softwareone Holding.
Diversification Opportunities for GM and Softwareone Holding
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Softwareone is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Softwareone Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softwareone Holding 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 Softwareone Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Softwareone Holding has no effect on the direction of GM i.e., GM and Softwareone Holding go up and down completely randomly.
Pair Corralation between GM and Softwareone Holding
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.79 times more return on investment than Softwareone Holding. However, General Motors is 1.27 times less risky than Softwareone Holding. It trades about 0.06 of its potential returns per unit of risk. Softwareone Holding is currently generating about -0.03 per unit of risk. If you would invest 3,525 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,034 from holding General Motors or generate 57.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
General Motors vs. Softwareone Holding
Performance |
| Timeline |
| General Motors |
| Softwareone Holding |
GM and Softwareone Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Softwareone Holding
The main advantage of trading using opposite GM and Softwareone Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Softwareone Holding 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 Softwareone Holding will offset losses from the drop in Softwareone Holding's long position.The idea behind General Motors and Softwareone Holding 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.| Softwareone Holding vs. Logitech International SA | Softwareone Holding vs. VAT Group AG | Softwareone Holding vs. Stadler Rail AG | Softwareone Holding vs. Cembra Money Bank |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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