Correlation Between GM and Sylvania Platinum

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

Diversification Opportunities for GM and Sylvania Platinum

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between GM and Sylvania is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sylvania Platinum Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sylvania Platinum 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 Sylvania Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sylvania Platinum has no effect on the direction of GM i.e., GM and Sylvania Platinum go up and down completely randomly.

Pair Corralation between GM and Sylvania Platinum

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.63 times more return on investment than Sylvania Platinum. However, General Motors is 1.58 times less risky than Sylvania Platinum. It trades about 0.06 of its potential returns per unit of risk. Sylvania Platinum Limited is currently generating about -0.03 per unit of risk. If you would invest  3,586  in General Motors on December 29, 2023 and sell it today you would earn a total of  873.00  from holding General Motors or generate 24.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Sylvania Platinum Limited

 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.
Sylvania Platinum 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Sylvania Platinum Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GM and Sylvania Platinum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Sylvania Platinum

The main advantage of trading using opposite GM and Sylvania Platinum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sylvania Platinum 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 Sylvania Platinum will offset losses from the drop in Sylvania Platinum's long position.
The idea behind General Motors and Sylvania Platinum Limited 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.
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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