Correlation Between GM and Dah Sing
Can any of the company-specific risk be diversified away by investing in both GM and Dah Sing 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 Dah Sing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Dah Sing Financial, you can compare the effects of market volatilities on GM and Dah Sing 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 Dah Sing. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Dah Sing.
Diversification Opportunities for GM and Dah Sing
Very good diversification
The 3 months correlation between GM and Dah is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Dah Sing Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dah Sing Financial 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 Dah Sing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dah Sing Financial has no effect on the direction of GM i.e., GM and Dah Sing go up and down completely randomly.
Pair Corralation between GM and Dah Sing
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Dah Sing. In addition to that, GM is 2.13 times more volatile than Dah Sing Financial. It trades about -0.08 of its total potential returns per unit of risk. Dah Sing Financial is currently generating about 0.23 per unit of volatility. If you would invest 977.00 in Dah Sing Financial on December 5, 2024 and sell it today you would earn a total of 150.00 from holding Dah Sing Financial or generate 15.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.33% |
Values | Daily Returns |
General Motors vs. Dah Sing Financial
Performance |
Timeline |
General Motors |
Dah Sing Financial |
GM and Dah Sing Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Dah Sing
The main advantage of trading using opposite GM and Dah Sing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Dah Sing 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 Dah Sing will offset losses from the drop in Dah Sing's long position.The idea behind General Motors and Dah Sing Financial 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.Dah Sing vs. First Bancorp | Dah Sing vs. Franklin Financial Services | Dah Sing vs. National Bank Holdings | Dah Sing vs. Bankwell Financial Group |
Check out your portfolio center.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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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