Correlation Between GM and Toho
Can any of the company-specific risk be diversified away by investing in both GM and Toho 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 Toho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Toho Co, you can compare the effects of market volatilities on GM and Toho 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 Toho. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Toho.
Diversification Opportunities for GM and Toho
Pay attention - limited upside
The 3 months correlation between GM and Toho is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Toho Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toho 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 Toho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toho has no effect on the direction of GM i.e., GM and Toho go up and down completely randomly.
Pair Corralation between GM and Toho
Allowing for the 90-day total investment horizon GM is expected to generate 1.27 times less return on investment than Toho. In addition to that, GM is 1.42 times more volatile than Toho Co. It trades about 0.03 of its total potential returns per unit of risk. Toho Co is currently generating about 0.05 per unit of volatility. If you would invest 1,359 in Toho Co on November 9, 2024 and sell it today you would earn a total of 109.00 from holding Toho Co or generate 8.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 25.56% |
| Values | Daily Returns |
General Motors vs. Toho Co
Performance |
| Timeline |
| General Motors |
| Toho |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
GM and Toho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Toho
The main advantage of trading using opposite GM and Toho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Toho 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 Toho will offset losses from the drop in Toho's long position.The idea behind General Motors and Toho Co 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.| Toho vs. GRUPO CARSO A1 | Toho vs. SERI INDUSTRIAL EO | Toho vs. MCEWEN MINING INC | Toho vs. Geely Automobile Holdings |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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