Correlation Between GM and SuperAlloy Industrial

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

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

Diversification Opportunities for GM and SuperAlloy Industrial

-0.46

Correlation Coefficient

GM  SuperAlloy Industrial

Very good diversification

The 3 months correlation between GM and SuperAlloy is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SuperAlloy Industrial Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SuperAlloy Industrial Co, 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 SuperAlloy Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SuperAlloy Industrial Co, has no effect on the direction of GM i.e., GM and SuperAlloy Industrial go up and down completely randomly.

Pair Corralation between GM and SuperAlloy Industrial

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.93 times more return on investment than SuperAlloy Industrial. However, General Motors is 1.08 times less risky than SuperAlloy Industrial. It trades about 0.09 of its potential returns per unit of risk. SuperAlloy Industrial Co, is currently generating about -0.05 per unit of risk. If you would invest  3,511  in General Motors on September 15, 2024 and sell it today you would earn a total of  1,742  from holding General Motors or generate 49.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.98%
Values	Daily Returns

General Motors  vs.  SuperAlloy Industrial Co,

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.

SuperAlloy Industrial Co,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SuperAlloy Industrial Co, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with GM and SuperAlloy Industrial

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

The idea behind General Motors and SuperAlloy Industrial 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.