Correlation Between GM and Argha Karya

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

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

Diversification Opportunities for GM and Argha Karya

-0.52

Correlation Coefficient

GM  Argha Karya

Excellent diversification

The 3 months correlation between GM and Argha is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Argha Karya Prima in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argha Karya Prima 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 Argha Karya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argha Karya Prima has no effect on the direction of GM i.e., GM and Argha Karya go up and down completely randomly.

Pair Corralation between GM and Argha Karya

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Argha Karya. In addition to that, GM is 1.09 times more volatile than Argha Karya Prima. It trades about -0.14 of its total potential returns per unit of risk. Argha Karya Prima is currently generating about -0.15 per unit of volatility. If you would invest  65,000  in Argha Karya Prima on September 12, 2024 and sell it today you would lose (5,000) from holding Argha Karya Prima or give up 7.69% of portfolio value over 90 days.

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

General Motors  vs.  Argha Karya Prima

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 unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Argha Karya Prima

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Argha Karya Prima has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with GM and Argha Karya

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

The idea behind General Motors and Argha Karya Prima 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.