Correlation Between GM and Ta Chen

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

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

Diversification Opportunities for GM and Ta Chen

0.06

Correlation Coefficient

GM  Ta Chen

Significant diversification

The 3 months correlation between GM and 2027 is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ta Chen Stainless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ta Chen Stainless 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 Ta Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ta Chen Stainless has no effect on the direction of GM i.e., GM and Ta Chen go up and down completely randomly.

Pair Corralation between GM and Ta Chen

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.28 times more return on investment than Ta Chen. However, GM is 1.28 times more volatile than Ta Chen Stainless. It trades about 0.09 of its potential returns per unit of risk. Ta Chen Stainless is currently generating about -0.04 per unit of risk. If you would invest  3,508  in General Motors on September 12, 2024 and sell it today you would earn a total of  1,696  from holding General Motors or generate 48.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.98%
Values	Daily Returns

General Motors  vs.  Ta Chen Stainless

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Ta Chen Stainless

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ta Chen Stainless are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Ta Chen is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GM and Ta Chen

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

The idea behind General Motors and Ta Chen Stainless 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.