Correlation Between GM and Cathay Koreataiwan

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both GM and Cathay Koreataiwan 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 Cathay Koreataiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Cathay Koreataiwan IT, you can compare the effects of market volatilities on GM and Cathay Koreataiwan 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 Cathay Koreataiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Cathay Koreataiwan.

Diversification Opportunities for GM and Cathay Koreataiwan

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between GM and Cathay is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Cathay Koreataiwan IT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Koreataiwan 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 Cathay Koreataiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Koreataiwan has no effect on the direction of GM i.e., GM and Cathay Koreataiwan go up and down completely randomly.

Pair Corralation between GM and Cathay Koreataiwan

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.51 times more return on investment than Cathay Koreataiwan. However, GM is 1.51 times more volatile than Cathay Koreataiwan IT. It trades about 0.05 of its potential returns per unit of risk. Cathay Koreataiwan IT is currently generating about 0.05 per unit of risk. If you would invest  3,516  in General Motors on September 27, 2024 and sell it today you would earn a total of  1,835  from holding General Motors or generate 52.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy96.58%
ValuesDaily Returns

General Motors  vs.  Cathay Koreataiwan IT

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.
Cathay Koreataiwan 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cathay Koreataiwan IT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cathay Koreataiwan is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

GM and Cathay Koreataiwan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Cathay Koreataiwan

The main advantage of trading using opposite GM and Cathay Koreataiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Cathay Koreataiwan 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 Cathay Koreataiwan will offset losses from the drop in Cathay Koreataiwan's long position.
The idea behind General Motors and Cathay Koreataiwan IT 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.
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

Other Complementary Tools

AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Content Syndication
Quickly integrate customizable finance content to your own investment portal