Correlation Between GM and Liton Technology

Can any of the company-specific risk be diversified away by investing in both GM and Liton 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 Liton 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 Liton Technology, you can compare the effects of market volatilities on GM and Liton 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 Liton Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Liton Technology.

Diversification Opportunities for GM and Liton Technology

0.3

Correlation Coefficient

GM  Liton Technology

Weak diversification

The 3 months correlation between GM and Liton is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Liton Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liton 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 Liton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liton Technology has no effect on the direction of GM i.e., GM and Liton Technology go up and down completely randomly.

Pair Corralation between GM and Liton Technology

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.0 times more return on investment than Liton Technology. However, General Motors is 1.0 times less risky than Liton Technology. It trades about 0.06 of its potential returns per unit of risk. Liton Technology is currently generating about -0.04 per unit of risk. If you would invest  4,616  in General Motors on September 21, 2024 and sell it today you would earn a total of  552.50  from holding General Motors or generate 11.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.07%
Values	Daily Returns

General Motors  vs.  Liton Technology

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Liton Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liton Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Liton 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 Liton Technology

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

The idea behind General Motors and Liton 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.