Correlation Between GM and Total Bangun

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

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

Diversification Opportunities for GM and Total Bangun

0.75

Correlation Coefficient

GM  Total Bangun

Poor diversification

The 3 months correlation between GM and Total is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Total Bangun Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Bangun Persada 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 Total Bangun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Bangun Persada has no effect on the direction of GM i.e., GM and Total Bangun go up and down completely randomly.

Pair Corralation between GM and Total Bangun

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.75 times more return on investment than Total Bangun. However, General Motors is 1.33 times less risky than Total Bangun. It trades about 0.1 of its potential returns per unit of risk. Total Bangun Persada is currently generating about 0.05 per unit of risk. If you would invest  4,829  in General Motors on August 31, 2024 and sell it today you would earn a total of  721.00  from holding General Motors or generate 14.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Total Bangun Persada

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Total Bangun Persada

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Total Bangun Persada are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Total Bangun may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with GM and Total Bangun

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

The idea behind General Motors and Total Bangun Persada 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.