Correlation Between Porsche Automobile and GM
Can any of the company-specific risk be diversified away by investing in both Porsche Automobile and GM 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 Porsche Automobile and GM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Porsche Automobile Holding and General Motors, you can compare the effects of market volatilities on Porsche Automobile and GM 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 Porsche Automobile with a short position of GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Porsche Automobile and GM.
Diversification Opportunities for Porsche Automobile and GM
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Porsche and GM is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Porsche Automobile Holding and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Porsche Automobile 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 Porsche Automobile Holding are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Porsche Automobile i.e., Porsche Automobile and GM go up and down completely randomly.
Pair Corralation between Porsche Automobile and GM
Assuming the 90 days horizon Porsche Automobile Holding is expected to generate 0.49 times more return on investment than GM. However, Porsche Automobile Holding is 2.05 times less risky than GM. It trades about 0.13 of its potential returns per unit of risk. General Motors is currently generating about -0.09 per unit of risk. If you would invest 368.00 in Porsche Automobile Holding on November 9, 2024 and sell it today you would earn a total of 13.00 from holding Porsche Automobile Holding or generate 3.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Porsche Automobile Holding vs. General Motors
Performance |
| Timeline |
| Porsche Automobile |
| General Motors |
Porsche Automobile and GM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Porsche Automobile and GM
The main advantage of trading using opposite Porsche Automobile and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porsche Automobile position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.| Porsche Automobile vs. Volkswagen AG 110 | Porsche Automobile vs. Volkswagen AG | Porsche Automobile vs. Mercedes Benz Group AG | Porsche Automobile vs. Volkswagen AG Pref |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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