Correlation Between GM and PP Presisi

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

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

Diversification Opportunities for GM and PP Presisi

0.37

Correlation Coefficient

GM  PP Presisi

Weak diversification

The 3 months correlation between GM and PPRE is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and PP Presisi Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PP Presisi Tbk 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 PP Presisi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PP Presisi Tbk has no effect on the direction of GM i.e., GM and PP Presisi go up and down completely randomly.

Pair Corralation between GM and PP Presisi

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.95 times more return on investment than PP Presisi. However, General Motors is 1.05 times less risky than PP Presisi. It trades about -0.01 of its potential returns per unit of risk. PP Presisi Tbk is currently generating about -0.04 per unit of risk. If you would invest  5,404  in General Motors on December 26, 2024 and sell it today you would lose (145.00) from holding General Motors or give up 2.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

General Motors  vs.  PP Presisi Tbk

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.

PP Presisi Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days PP Presisi Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, PP Presisi is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GM and PP Presisi

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

The idea behind General Motors and PP Presisi Tbk 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.