Correlation Between Birks and GM

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

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

Diversification Opportunities for Birks and GM

0.63

Correlation Coefficient

Birks  GM

Poor diversification

The 3 months correlation between Birks and GM is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Birks Group and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Birks 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 Birks Group 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 Birks i.e., Birks and GM go up and down completely randomly.

Pair Corralation between Birks and GM

Considering the 90-day investment horizon Birks Group is expected to under-perform the GM. In addition to that, Birks is 2.03 times more volatile than General Motors. It trades about -0.07 of its total potential returns per unit of risk. General Motors is currently generating about -0.01 per unit of volatility. If you would invest  5,404  in General Motors on December 26, 2024 and sell it today you would lose (145.00) from holding General Motors or give up 2.68% of portfolio value over 90 days.

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

Birks Group  vs.  General Motors

Birks Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Birks Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Birks and GM

The main advantage of trading using opposite Birks and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Birks 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 Birks Group 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.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.