Correlation Between GM and Zwipe AS
Can any of the company-specific risk be diversified away by investing in both GM and Zwipe AS 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 Zwipe AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Zwipe AS, you can compare the effects of market volatilities on GM and Zwipe AS 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 Zwipe AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Zwipe AS.
Diversification Opportunities for GM and Zwipe AS
Very weak diversification
The 3 months correlation between GM and Zwipe is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Zwipe AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zwipe AS 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 Zwipe AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zwipe AS has no effect on the direction of GM i.e., GM and Zwipe AS go up and down completely randomly.
Pair Corralation between GM and Zwipe AS
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.09 times more return on investment than Zwipe AS. However, General Motors is 11.57 times less risky than Zwipe AS. It trades about -0.34 of its potential returns per unit of risk. Zwipe AS is currently generating about -0.04 per unit of risk. If you would invest 5,492 in General Motors on November 27, 2024 and sell it today you would lose (835.00) from holding General Motors or give up 15.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. Zwipe AS
Performance |
| Timeline |
| General Motors |
| Zwipe AS |
GM and Zwipe AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Zwipe AS
The main advantage of trading using opposite GM and Zwipe AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Zwipe AS 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 Zwipe AS will offset losses from the drop in Zwipe AS's long position.The idea behind General Motors and Zwipe AS 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.| Zwipe AS vs. Media and Games | Zwipe AS vs. Fractal Gaming Group | Zwipe AS vs. Corline Biomedical AB | Zwipe AS vs. Maven Wireless Sweden |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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