Correlation Between GM and BANDAI NAMCO

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

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

Diversification Opportunities for GM and BANDAI NAMCO

-0.69

Correlation Coefficient

GM  BANDAI NAMCO

Excellent diversification

The 3 months correlation between GM and BANDAI is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BANDAI NAMCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANDAI NAMCO Holdings 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 BANDAI NAMCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANDAI NAMCO Holdings has no effect on the direction of GM i.e., GM and BANDAI NAMCO go up and down completely randomly.

Pair Corralation between GM and BANDAI NAMCO

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the BANDAI NAMCO. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.09 times less risky than BANDAI NAMCO. The stock trades about -0.01 of its potential returns per unit of risk. The BANDAI NAMCO Holdings is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,181  in BANDAI NAMCO Holdings on December 26, 2024 and sell it today you would earn a total of  593.00  from holding BANDAI NAMCO Holdings or generate 50.21% 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.  BANDAI NAMCO Holdings

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.

BANDAI NAMCO Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BANDAI NAMCO Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, BANDAI NAMCO showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and BANDAI NAMCO

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

The idea behind General Motors and BANDAI NAMCO Holdings 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.