Correlation Between GM and San Shing

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

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

Diversification Opportunities for GM and San Shing

-0.26

Correlation Coefficient

GM  San Shing

Very good diversification

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

Pair Corralation between GM and San Shing

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the San Shing. In addition to that, GM is 4.07 times more volatile than San Shing Fastech. It trades about -0.08 of its total potential returns per unit of risk. San Shing Fastech is currently generating about 0.01 per unit of volatility. If you would invest  5,490  in San Shing Fastech on December 5, 2024 and sell it today you would earn a total of  20.00  from holding San Shing Fastech or generate 0.36% return on investment over 90 days.

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

General Motors  vs.  San Shing Fastech

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

San Shing Fastech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in San Shing Fastech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, San Shing 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 San Shing

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

The idea behind General Motors and San Shing Fastech 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.