Correlation Between GM and TIMES CHINA

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Can any of the company-specific risk be diversified away by investing in both GM and TIMES CHINA 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 TIMES CHINA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and TIMES CHINA HLDGS, you can compare the effects of market volatilities on GM and TIMES CHINA 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 TIMES CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and TIMES CHINA.

Diversification Opportunities for GM and TIMES CHINA

GMTIMESDiversified AwayGMTIMESDiversified Away100%
-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between GM and TIMES is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and TIMES CHINA HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIMES CHINA HLDGS 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 TIMES CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIMES CHINA HLDGS has no effect on the direction of GM i.e., GM and TIMES CHINA go up and down completely randomly.

Pair Corralation between GM and TIMES CHINA

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.25 times more return on investment than TIMES CHINA. However, General Motors is 4.03 times less risky than TIMES CHINA. It trades about 0.04 of its potential returns per unit of risk. TIMES CHINA HLDGS is currently generating about -0.01 per unit of risk. If you would invest  4,774  in General Motors on October 15, 2024 and sell it today you would earn a total of  211.00  from holding General Motors or generate 4.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy96.77%
ValuesDaily Returns

General Motors  vs.  TIMES CHINA HLDGS

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20020406080
JavaScript chart by amCharts 3.21.15GM T2H
       Timeline  
General Motors 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan4850525456586062
TIMES CHINA HLDGS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days TIMES CHINA HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan0.030.0350.040.0450.050.0550.06

GM and TIMES CHINA Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.64-5.73-3.81-1.890.01.913.895.877.859.83 0.010.020.030.040.050.06
JavaScript chart by amCharts 3.21.15GM T2H
       Returns  

Pair Trading with GM and TIMES CHINA

The main advantage of trading using opposite GM and TIMES CHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, TIMES CHINA 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 TIMES CHINA will offset losses from the drop in TIMES CHINA's long position.
The idea behind General Motors and TIMES CHINA HLDGS 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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