Correlation Between GM and Transmissora Aliana
Can any of the company-specific risk be diversified away by investing in both GM and Transmissora Aliana 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 Transmissora Aliana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Transmissora Aliana de, you can compare the effects of market volatilities on GM and Transmissora Aliana 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 Transmissora Aliana. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Transmissora Aliana.
Diversification Opportunities for GM and Transmissora Aliana
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Transmissora is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Transmissora Aliana de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transmissora Aliana 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 Transmissora Aliana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transmissora Aliana has no effect on the direction of GM i.e., GM and Transmissora Aliana go up and down completely randomly.
Pair Corralation between GM and Transmissora Aliana
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Transmissora Aliana. In addition to that, GM is 2.88 times more volatile than Transmissora Aliana de. It trades about -0.13 of its total potential returns per unit of risk. Transmissora Aliana de is currently generating about 0.1 per unit of volatility. If you would invest 1,089 in Transmissora Aliana de on November 5, 2024 and sell it today you would earn a total of 21.00 from holding Transmissora Aliana de or generate 1.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. Transmissora Aliana de
Performance |
| Timeline |
| General Motors |
| Transmissora Aliana |
GM and Transmissora Aliana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Transmissora Aliana
The main advantage of trading using opposite GM and Transmissora Aliana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Transmissora Aliana 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 Transmissora Aliana will offset losses from the drop in Transmissora Aliana's long position.The idea behind General Motors and Transmissora Aliana de 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.| Transmissora Aliana vs. Transmissora Aliana de | Transmissora Aliana vs. Klabin SA | Transmissora Aliana vs. Companhia de Saneamento | Transmissora Aliana vs. Transmissora Aliana de |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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