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

-0.77

Correlation Coefficient

GM  Dah Sing

Pay attention - limited upside

The 3 months correlation between GM and Dah is -0.77. 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 3.17 times more volatile than Dah Sing Financial. It trades about -0.03 of its total potential returns per unit of risk. Dah Sing Financial is currently generating about 0.17 per unit of volatility. If you would invest  1,040  in Dah Sing Financial on December 24, 2024 and sell it today you would earn a total of  87.00  from holding Dah Sing Financial or generate 8.37% return on investment over 90 days.

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

General Motors  vs.  Dah Sing Financial

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 very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Dah Sing Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dah Sing Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dah Sing may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.