Correlation Between GM and Bonava AB

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Can any of the company-specific risk be diversified away by investing in both GM and Bonava AB 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 Bonava AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Bonava AB, you can compare the effects of market volatilities on GM and Bonava AB 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 Bonava AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Bonava AB.

Diversification Opportunities for GM and Bonava AB

-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between GM and Bonava is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bonava AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonava AB 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 Bonava AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonava AB has no effect on the direction of GM i.e., GM and Bonava AB go up and down completely randomly.

Pair Corralation between GM and Bonava AB

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.02 times more return on investment than Bonava AB. However, GM is 1.02 times more volatile than Bonava AB. It trades about 0.07 of its potential returns per unit of risk. Bonava AB is currently generating about -0.03 per unit of risk. If you would invest  4,561  in General Motors on September 5, 2024 and sell it today you would earn a total of  775.00  from holding General Motors or generate 16.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.66%
ValuesDaily Returns

General Motors  vs.  Bonava AB

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) 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.
Bonava AB 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bonava AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bonava AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

GM and Bonava AB Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Bonava AB

The main advantage of trading using opposite GM and Bonava AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Bonava AB 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 Bonava AB will offset losses from the drop in Bonava AB's long position.
The idea behind General Motors and Bonava AB 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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