Correlation Between GM and Tian Ruixiang
Can any of the company-specific risk be diversified away by investing in both GM and Tian Ruixiang 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 Tian Ruixiang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Tian Ruixiang Holdings, you can compare the effects of market volatilities on GM and Tian Ruixiang 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 Tian Ruixiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Tian Ruixiang.
Diversification Opportunities for GM and Tian Ruixiang
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Tian is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tian Ruixiang Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tian Ruixiang Holdings 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 Tian Ruixiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tian Ruixiang Holdings has no effect on the direction of GM i.e., GM and Tian Ruixiang go up and down completely randomly.
Pair Corralation between GM and Tian Ruixiang
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Tian Ruixiang. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.37 times less risky than Tian Ruixiang. The stock trades about -0.1 of its potential returns per unit of risk. The Tian Ruixiang Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 171.00 in Tian Ruixiang Holdings on November 1, 2024 and sell it today you would earn a total of 4.00 from holding Tian Ruixiang Holdings or generate 2.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
General Motors vs. Tian Ruixiang Holdings
Performance |
| Timeline |
| General Motors |
| Tian Ruixiang Holdings |
GM and Tian Ruixiang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Tian Ruixiang
The main advantage of trading using opposite GM and Tian Ruixiang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Tian Ruixiang 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 Tian Ruixiang will offset losses from the drop in Tian Ruixiang's long position.The idea behind General Motors and Tian Ruixiang Holdings 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.| Tian Ruixiang vs. Reliance Global Group | Tian Ruixiang vs. Selectquote | Tian Ruixiang vs. GoHealth | Tian Ruixiang vs. Brown Brown |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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