Correlation Between GM and Shieh Yih

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

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

Diversification Opportunities for GM and Shieh Yih

-0.5

Correlation Coefficient

GM  Shieh Yih

Very good diversification

The 3 months correlation between GM and Shieh is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Shieh Yih Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shieh Yih Machinery 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 Shieh Yih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shieh Yih Machinery has no effect on the direction of GM i.e., GM and Shieh Yih go up and down completely randomly.

Pair Corralation between GM and Shieh Yih

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Shieh Yih. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.01 times less risky than Shieh Yih. The stock trades about -0.3 of its potential returns per unit of risk. The Shieh Yih Machinery is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,815  in Shieh Yih Machinery on September 24, 2024 and sell it today you would earn a total of  85.00  from holding Shieh Yih Machinery or generate 2.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Shieh Yih Machinery

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) 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.

Shieh Yih Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shieh Yih Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shieh Yih 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 Shieh Yih

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

The idea behind General Motors and Shieh Yih Machinery 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.