Correlation Between GM and Harn Engineering
Can any of the company-specific risk be diversified away by investing in both GM and Harn Engineering 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 Harn Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Harn Engineering Solutions, you can compare the effects of market volatilities on GM and Harn Engineering 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 Harn Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Harn Engineering.
Diversification Opportunities for GM and Harn Engineering
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Harn is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Harn Engineering Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harn Engineering Sol 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 Harn Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harn Engineering Sol has no effect on the direction of GM i.e., GM and Harn Engineering go up and down completely randomly.
Pair Corralation between GM and Harn Engineering
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Harn Engineering. In addition to that, GM is 2.76 times more volatile than Harn Engineering Solutions. It trades about -0.02 of its total potential returns per unit of risk. Harn Engineering Solutions is currently generating about 0.04 per unit of volatility. If you would invest 210.00 in Harn Engineering Solutions on December 25, 2024 and sell it today you would earn a total of 4.00 from holding Harn Engineering Solutions or generate 1.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 96.72% |
Values | Daily Returns |
General Motors vs. Harn Engineering Solutions
Performance |
Timeline |
General Motors |
Harn Engineering Sol |
GM and Harn Engineering Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Harn Engineering
The main advantage of trading using opposite GM and Harn Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Harn Engineering 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 Harn Engineering will offset losses from the drop in Harn Engineering's long position.The idea behind General Motors and Harn Engineering Solutions 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.Harn Engineering vs. Arrow Syndicate Public | Harn Engineering vs. Getabec Public | Harn Engineering vs. Ama Marine Public | Harn Engineering vs. Information and Communication |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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