Correlation Between GM and Samchai Steel

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

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

Diversification Opportunities for GM and Samchai Steel

0.43

Correlation Coefficient

GM  Samchai Steel

Very weak diversification

The 3 months correlation between GM and Samchai is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Samchai Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samchai Steel Industries 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 Samchai Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samchai Steel Industries has no effect on the direction of GM i.e., GM and Samchai Steel go up and down completely randomly.

Pair Corralation between GM and Samchai Steel

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.23 times more return on investment than Samchai Steel. However, General Motors is 4.43 times less risky than Samchai Steel. It trades about -0.1 of its potential returns per unit of risk. Samchai Steel Industries is currently generating about -0.1 per unit of risk. If you would invest  5,204  in General Motors on October 12, 2024 and sell it today you would lose (219.00) from holding General Motors or give up 4.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

General Motors  vs.  Samchai Steel Industries

General Motors

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Samchai Steel Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samchai Steel Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, Samchai Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Samchai Steel

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

The idea behind General Motors and Samchai Steel Industries 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.