Correlation Between GM and Skjern Bank

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

Diversification Opportunities for GM and Skjern Bank

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between GM and Skjern is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Skjern Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skjern Bank AS 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 Skjern Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skjern Bank AS has no effect on the direction of GM i.e., GM and Skjern Bank go up and down completely randomly.

Pair Corralation between GM and Skjern Bank

Allowing for the 90-day total investment horizon GM is expected to generate 1.22 times less return on investment than Skjern Bank. But when comparing it to its historical volatility, General Motors is 1.0 times less risky than Skjern Bank. It trades about 0.37 of its potential returns per unit of risk. Skjern Bank AS is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  16,173  in Skjern Bank AS on December 29, 2023 and sell it today you would earn a total of  2,527  from holding Skjern Bank AS or generate 15.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

General Motors  vs.  Skjern Bank AS

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 17 (%) 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.
Skjern Bank AS 

Risk-Adjusted Performance

23 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Skjern Bank AS are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Skjern Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

GM and Skjern Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Skjern Bank

The main advantage of trading using opposite GM and Skjern Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Skjern Bank 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 Skjern Bank will offset losses from the drop in Skjern Bank's long position.
The idea behind General Motors and Skjern Bank AS 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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