Correlation Between GM and Taiwan Navigation

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

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

Diversification Opportunities for GM and Taiwan Navigation

-0.48

Correlation Coefficient

GM  Taiwan Navigation

Very good diversification

The 3 months correlation between GM and Taiwan is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Taiwan Navigation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Navigation 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 Taiwan Navigation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Navigation has no effect on the direction of GM i.e., GM and Taiwan Navigation go up and down completely randomly.

Pair Corralation between GM and Taiwan Navigation

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Taiwan Navigation. In addition to that, GM is 2.23 times more volatile than Taiwan Navigation Co. It trades about -0.03 of its total potential returns per unit of risk. Taiwan Navigation Co is currently generating about 0.13 per unit of volatility. If you would invest  2,955  in Taiwan Navigation Co on December 26, 2024 and sell it today you would earn a total of  240.00  from holding Taiwan Navigation Co or generate 8.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.8%
Values	Daily Returns

General Motors  vs.  Taiwan Navigation 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 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.

Taiwan Navigation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Navigation Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Navigation may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and Taiwan Navigation

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

The idea behind General Motors and Taiwan Navigation 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.