Correlation Between Adient PLC and GM

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

By analyzing existing cross correlation between Adient PLC and General Motors, you can compare the effects of market volatilities on Adient PLC and GM 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 Adient PLC with a short position of GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adient PLC and GM.

Diversification Opportunities for Adient PLC and GM

-0.61

Correlation Coefficient

Adient PLC  GM

Excellent diversification

The 3 months correlation between Adient and GM is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Adient PLC 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 Adient PLC are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Adient PLC i.e., Adient PLC and GM go up and down completely randomly.

Pair Corralation between Adient PLC and GM

Given the investment horizon of 90 days Adient PLC is expected to under-perform the GM. But the stock apears to be less risky and, when comparing its historical volatility, Adient PLC is 1.17 times less risky than GM. The stock trades about -0.17 of its potential returns per unit of risk. The General Motors is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,154  in General Motors on August 30, 2024 and sell it today you would earn a total of  396.00  from holding General Motors or generate 7.68% return on investment over 90 days.

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

Adient PLC  vs.  General Motors

Adient PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) 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.

Pair Trading with Adient PLC and GM

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

The idea behind Adient PLC and General Motors 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.