Correlation Between GM and Berjaya Food

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

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

Diversification Opportunities for GM and Berjaya Food

0.35

Correlation Coefficient

GM  Berjaya Food

Weak diversification

The 3 months correlation between GM and Berjaya is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Berjaya Food Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berjaya Food 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 Berjaya Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berjaya Food Bhd has no effect on the direction of GM i.e., GM and Berjaya Food go up and down completely randomly.

Pair Corralation between GM and Berjaya Food

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Berjaya Food. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.3 times less risky than Berjaya Food. The stock trades about -0.07 of its potential returns per unit of risk. The Berjaya Food Bhd is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  34.00  in Berjaya Food Bhd on December 28, 2024 and sell it today you would earn a total of  1.00  from holding Berjaya Food Bhd or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

General Motors  vs.  Berjaya Food Bhd

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Berjaya Food Bhd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berjaya Food Bhd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Berjaya Food may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and Berjaya Food

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

The idea behind General Motors and Berjaya Food 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.