Correlation Between GM and I Hwa

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

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

Diversification Opportunities for GM and I Hwa

-0.51

Correlation Coefficient

GM  I Hwa

Excellent diversification

The 3 months correlation between GM and 1456 is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and I Hwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I Hwa Industrial 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 I Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I Hwa Industrial has no effect on the direction of GM i.e., GM and I Hwa go up and down completely randomly.

Pair Corralation between GM and I Hwa

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the I Hwa. In addition to that, GM is 1.46 times more volatile than I Hwa Industrial Co. It trades about -0.02 of its total potential returns per unit of risk. I Hwa Industrial Co is currently generating about 0.08 per unit of volatility. If you would invest  1,530  in I Hwa Industrial Co on December 25, 2024 and sell it today you would earn a total of  110.00  from holding I Hwa Industrial Co or generate 7.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.22%
Values	Daily Returns

General Motors  vs.  I Hwa Industrial Co

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.

I Hwa Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in I Hwa Industrial Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, I Hwa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and I Hwa

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

The idea behind General Motors and I Hwa Industrial 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.