Correlation Between GM and Voestalpine
Can any of the company-specific risk be diversified away by investing in both GM and Voestalpine 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 Voestalpine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Voestalpine AG PK, you can compare the effects of market volatilities on GM and Voestalpine 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 Voestalpine. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Voestalpine.
Diversification Opportunities for GM and Voestalpine
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Voestalpine is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Voestalpine AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voestalpine AG PK 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 Voestalpine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voestalpine AG PK has no effect on the direction of GM i.e., GM and Voestalpine go up and down completely randomly.
Pair Corralation between GM and Voestalpine
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Voestalpine. In addition to that, GM is 1.23 times more volatile than Voestalpine AG PK. It trades about -0.12 of its total potential returns per unit of risk. Voestalpine AG PK is currently generating about 0.05 per unit of volatility. If you would invest 368.00 in Voestalpine AG PK on September 20, 2024 and sell it today you would earn a total of 6.00 from holding Voestalpine AG PK or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Voestalpine AG PK
Performance |
| Timeline |
| General Motors |
| Voestalpine AG PK |
GM and Voestalpine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Voestalpine
The main advantage of trading using opposite GM and Voestalpine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Voestalpine 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 Voestalpine will offset losses from the drop in Voestalpine's long position.The idea behind General Motors and Voestalpine AG PK 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.| Voestalpine vs. ArcelorMittal SA ADR | Voestalpine vs. Gerdau SA ADR | Voestalpine vs. POSCO Holdings | Voestalpine vs. HUMANA INC |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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