Correlation Between GM and Hartalega Holdings

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

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

Diversification Opportunities for GM and Hartalega Holdings

0.59

Correlation Coefficient

GM  Hartalega Holdings

Very weak diversification

The 3 months correlation between GM and Hartalega is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hartalega Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartalega Holdings Bhd 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 Hartalega Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartalega Holdings Bhd has no effect on the direction of GM i.e., GM and Hartalega Holdings go up and down completely randomly.

Pair Corralation between GM and Hartalega Holdings

Allowing for the 90-day total investment horizon GM is expected to generate 2.09 times less return on investment than Hartalega Holdings. But when comparing it to its historical volatility, General Motors is 1.67 times less risky than Hartalega Holdings. It trades about 0.05 of its potential returns per unit of risk. Hartalega Holdings Bhd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  163.00  in Hartalega Holdings Bhd on September 26, 2024 and sell it today you would earn a total of  221.00  from holding Hartalega Holdings Bhd or generate 135.58% return on investment over 90 days.

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

General Motors  vs.  Hartalega Holdings Bhd

General Motors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 9 (%) 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.

Hartalega Holdings Bhd

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hartalega Holdings Bhd are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Hartalega Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Hartalega Holdings

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

The idea behind General Motors and Hartalega Holdings Bhd 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.