Correlation Between GM and Hedef Holdings

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

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

Diversification Opportunities for GM and Hedef Holdings

-0.6

Correlation Coefficient

GM  Hedef Holdings

Excellent diversification

The 3 months correlation between GM and Hedef is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hedef Holdings AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hedef Holdings AS 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 Hedef Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hedef Holdings AS has no effect on the direction of GM i.e., GM and Hedef Holdings go up and down completely randomly.

Pair Corralation between GM and Hedef Holdings

Allowing for the 90-day total investment horizon GM is expected to generate 5.97 times less return on investment than Hedef Holdings. But when comparing it to its historical volatility, General Motors is 8.83 times less risky than Hedef Holdings. It trades about 0.05 of its potential returns per unit of risk. Hedef Holdings AS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  346.00  in Hedef Holdings AS on September 30, 2024 and sell it today you would lose (30.00) from holding Hedef Holdings AS or give up 8.67% of portfolio value over 90 days.

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

General Motors  vs.  Hedef Holdings AS

General Motors

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 11 (%) 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.

Hedef Holdings AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hedef Holdings AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with GM and Hedef Holdings

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

The idea behind General Motors and Hedef Holdings AS 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.