Correlation Between GM and Tokyo Gas
Can any of the company-specific risk be diversified away by investing in both GM and Tokyo Gas 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 Tokyo Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Tokyo Gas Co, you can compare the effects of market volatilities on GM and Tokyo Gas 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 Tokyo Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Tokyo Gas.
Diversification Opportunities for GM and Tokyo Gas
Very weak diversification
The 3 months correlation between GM and Tokyo is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tokyo Gas Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Gas 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 Tokyo Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Gas has no effect on the direction of GM i.e., GM and Tokyo Gas go up and down completely randomly.
Pair Corralation between GM and Tokyo Gas
Allowing for the 90-day total investment horizon GM is expected to generate 4.11 times less return on investment than Tokyo Gas. But when comparing it to its historical volatility, General Motors is 1.98 times less risky than Tokyo Gas. It trades about 0.12 of its potential returns per unit of risk. Tokyo Gas Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,153 in Tokyo Gas Co on January 25, 2024 and sell it today you would earn a total of 192.00 from holding Tokyo Gas Co or generate 16.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Tokyo Gas Co
Performance |
| Timeline |
| General Motors |
| Tokyo Gas |
GM and Tokyo Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Tokyo Gas
The main advantage of trading using opposite GM and Tokyo Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Tokyo Gas 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 Tokyo Gas will offset losses from the drop in Tokyo Gas' long position.The idea behind General Motors and Tokyo Gas Co 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.| Tokyo Gas vs. Anhui Conch Cement | Tokyo Gas vs. Sysmex Corp | Tokyo Gas vs. PICC Property and | Tokyo Gas vs. Aquagold International |
Check out your portfolio center.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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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