Correlation Between GENERAL and Sapiens International

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

By analyzing existing cross correlation between GENERAL ELEC CAP and Sapiens International, you can compare the effects of market volatilities on GENERAL and Sapiens International 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 GENERAL with a short position of Sapiens International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GENERAL and Sapiens International.

Diversification Opportunities for GENERAL and Sapiens International

-0.26

Correlation Coefficient

GENERAL  Sapiens International

Very good diversification

The 3 months correlation between GENERAL and Sapiens is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP and Sapiens International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapiens International and GENERAL 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 ELEC CAP are associated (or correlated) with Sapiens International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapiens International has no effect on the direction of GENERAL i.e., GENERAL and Sapiens International go up and down completely randomly.

Pair Corralation between GENERAL and Sapiens International

Assuming the 90 days trading horizon GENERAL ELEC CAP is expected to generate 0.16 times more return on investment than Sapiens International. However, GENERAL ELEC CAP is 6.33 times less risky than Sapiens International. It trades about -0.04 of its potential returns per unit of risk. Sapiens International is currently generating about -0.01 per unit of risk. If you would invest  9,996  in GENERAL ELEC CAP on December 23, 2024 and sell it today you would lose (20.00) from holding GENERAL ELEC CAP or give up 0.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	34.43%
Values	Daily Returns

GENERAL ELEC CAP  vs.  Sapiens International

GENERAL ELEC CAP

Risk-Adjusted Performance

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Sapiens International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sapiens International is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GENERAL and Sapiens International

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

The idea behind GENERAL ELEC CAP and Sapiens International 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.