Correlation Between GM and GENTING SG

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

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

Diversification Opportunities for GM and GENTING SG

0.47

Correlation Coefficient

GM  GENTING SG

Very weak diversification

The 3 months correlation between GM and GENTING is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and GENTING SG LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENTING SG LTD 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 GENTING SG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENTING SG LTD has no effect on the direction of GM i.e., GM and GENTING SG go up and down completely randomly.

Pair Corralation between GM and GENTING SG

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.03 times more return on investment than GENTING SG. However, GM is 1.03 times more volatile than GENTING SG LTD. It trades about -0.01 of its potential returns per unit of risk. GENTING SG LTD is currently generating about -0.02 per unit of risk. If you would invest  5,021  in General Motors on December 19, 2024 and sell it today you would lose (154.00) from holding General Motors or give up 3.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

General Motors  vs.  GENTING SG LTD

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.

GENTING SG LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days GENTING SG LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GENTING SG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and GENTING SG

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

The idea behind General Motors and GENTING SG LTD 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.