Correlation Between GM and Shinkong Textile

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

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

Diversification Opportunities for GM and Shinkong Textile

-0.78

Correlation Coefficient

GM  Shinkong Textile

Pay attention - limited upside

The 3 months correlation between GM and Shinkong is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Shinkong Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Textile 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 Shinkong Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinkong Textile has no effect on the direction of GM i.e., GM and Shinkong Textile go up and down completely randomly.

Pair Corralation between GM and Shinkong Textile

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Shinkong Textile. In addition to that, GM is 2.34 times more volatile than Shinkong Textile Co. It trades about -0.16 of its total potential returns per unit of risk. Shinkong Textile Co is currently generating about -0.03 per unit of volatility. If you would invest  4,545  in Shinkong Textile Co on September 19, 2024 and sell it today you would lose (45.00) from holding Shinkong Textile Co or give up 0.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.3%
Values	Daily Returns

General Motors  vs.  Shinkong Textile Co

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shinkong Textile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinkong Textile Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shinkong Textile is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GM and Shinkong Textile

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

The idea behind General Motors and Shinkong Textile Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.