Correlation Between GM and Changzhou Evergreen

Can any of the company-specific risk be diversified away by investing in both GM and Changzhou Evergreen 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 Changzhou Evergreen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Changzhou Evergreen Technology, you can compare the effects of market volatilities on GM and Changzhou Evergreen 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 Changzhou Evergreen. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Changzhou Evergreen.

Diversification Opportunities for GM and Changzhou Evergreen

-0.35

Correlation Coefficient

GM  Changzhou Evergreen

Very good diversification

The 3 months correlation between GM and Changzhou is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Changzhou Evergreen Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changzhou Evergreen 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 Changzhou Evergreen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changzhou Evergreen has no effect on the direction of GM i.e., GM and Changzhou Evergreen go up and down completely randomly.

Pair Corralation between GM and Changzhou Evergreen

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Changzhou Evergreen. In addition to that, GM is 1.02 times more volatile than Changzhou Evergreen Technology. It trades about -0.02 of its total potential returns per unit of risk. Changzhou Evergreen Technology is currently generating about 0.09 per unit of volatility. If you would invest  1,725  in Changzhou Evergreen Technology on December 22, 2024 and sell it today you would earn a total of  209.00  from holding Changzhou Evergreen Technology or generate 12.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

General Motors  vs.  Changzhou Evergreen Technology

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Changzhou Evergreen

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Changzhou Evergreen Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changzhou Evergreen sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Changzhou Evergreen

The main advantage of trading using opposite GM and Changzhou Evergreen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Changzhou Evergreen 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 Changzhou Evergreen will offset losses from the drop in Changzhou Evergreen's long position.

The idea behind General Motors and Changzhou Evergreen Technology 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.