Correlation Between GM and Jiangsu Sainty

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

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

Diversification Opportunities for GM and Jiangsu Sainty

0.57

Correlation Coefficient

GM  Jiangsu Sainty

Very weak diversification

The 3 months correlation between GM and Jiangsu is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Jiangsu Sainty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Sainty Corp 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 Jiangsu Sainty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Sainty Corp has no effect on the direction of GM i.e., GM and Jiangsu Sainty go up and down completely randomly.

Pair Corralation between GM and Jiangsu Sainty

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.95 times more return on investment than Jiangsu Sainty. However, General Motors is 1.05 times less risky than Jiangsu Sainty. It trades about 0.09 of its potential returns per unit of risk. Jiangsu Sainty Corp is currently generating about 0.08 per unit of risk. If you would invest  4,591  in General Motors on October 8, 2024 and sell it today you would earn a total of  586.00  from holding General Motors or generate 12.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

General Motors  vs.  Jiangsu Sainty Corp

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Jiangsu Sainty Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Sainty Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Sainty may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GM and Jiangsu Sainty

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

The idea behind General Motors and Jiangsu Sainty Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.