Correlation Between GM and Templeton Global
Can any of the company-specific risk be diversified away by investing in both GM and Templeton Global 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 Templeton Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Templeton Global AD, you can compare the effects of market volatilities on GM and Templeton Global 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 Templeton Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Templeton Global.
Diversification Opportunities for GM and Templeton Global
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Templeton is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Templeton Global AD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Global 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 Templeton Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Global has no effect on the direction of GM i.e., GM and Templeton Global go up and down completely randomly.
Pair Corralation between GM and Templeton Global
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.96 times more return on investment than Templeton Global. However, GM is 1.96 times more volatile than Templeton Global AD. It trades about 0.04 of its potential returns per unit of risk. Templeton Global AD is currently generating about 0.01 per unit of risk. If you would invest 3,848 in General Motors on October 23, 2024 and sell it today you would earn a total of 1,249 from holding General Motors or generate 32.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 46.76% |
| Values | Daily Returns |
General Motors vs. Templeton Global AD
Performance |
| Timeline |
| General Motors |
| Templeton Global |
GM and Templeton Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Templeton Global
The main advantage of trading using opposite GM and Templeton Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Templeton Global 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 Templeton Global will offset losses from the drop in Templeton Global's long position.The idea behind General Motors and Templeton Global AD 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.| Templeton Global vs. Azvalor Global Value | Templeton Global vs. JPM Global Natural | Templeton Global vs. Cobas Global PP | Templeton Global vs. JPMF Global Natural |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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