Correlation Between GM and Ecopro

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

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

Diversification Opportunities for GM and Ecopro

0.08

Correlation Coefficient

GM  Ecopro

Significant diversification

The 3 months correlation between GM and Ecopro is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ecopro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopro 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 Ecopro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecopro has no effect on the direction of GM i.e., GM and Ecopro go up and down completely randomly.

Pair Corralation between GM and Ecopro

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Ecopro. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.22 times less risky than Ecopro. The stock trades about -0.06 of its potential returns per unit of risk. The Ecopro Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,637,255  in Ecopro Co on December 28, 2024 and sell it today you would earn a total of  182,745  from holding Ecopro Co or generate 3.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

General Motors  vs.  Ecopro Co

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Ecopro

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopro Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ecopro may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and Ecopro

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

The idea behind General Motors and Ecopro 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.