Correlation Between GM and EMemory Technology

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

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

Diversification Opportunities for GM and EMemory Technology

-0.14

Correlation Coefficient

GM  EMemory Technology

Good diversification

The 3 months correlation between GM and EMemory is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and eMemory Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eMemory Technology 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 EMemory Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eMemory Technology has no effect on the direction of GM i.e., GM and EMemory Technology go up and down completely randomly.

Pair Corralation between GM and EMemory Technology

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the EMemory Technology. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.34 times less risky than EMemory Technology. The stock trades about -0.11 of its potential returns per unit of risk. The eMemory Technology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  306,500  in eMemory Technology on December 4, 2024 and sell it today you would lose (18,000) from holding eMemory Technology or give up 5.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

General Motors  vs.  eMemory Technology

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

eMemory Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days eMemory Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, EMemory Technology 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 EMemory Technology

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

The idea behind General Motors and eMemory Technology 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..