Correlation Between GM and Saga Furs

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

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

Diversification Opportunities for GM and Saga Furs

-0.1

Correlation Coefficient

GM  Saga Furs

Good diversification

The 3 months correlation between GM and Saga is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Saga Furs Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saga Furs Oyj 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 Saga Furs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saga Furs Oyj has no effect on the direction of GM i.e., GM and Saga Furs go up and down completely randomly.

Pair Corralation between GM and Saga Furs

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.13 times more return on investment than Saga Furs. However, GM is 1.13 times more volatile than Saga Furs Oyj. It trades about 0.13 of its potential returns per unit of risk. Saga Furs Oyj is currently generating about -0.05 per unit of risk. If you would invest  4,488  in General Motors on October 3, 2024 and sell it today you would earn a total of  839.00  from holding General Motors or generate 18.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

General Motors  vs.  Saga Furs Oyj

General Motors

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 10 (%) 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.

Saga Furs Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saga Furs Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical 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 Saga Furs

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

The idea behind General Motors and Saga Furs Oyj 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.