Correlation Between GM and 786 Investment

Can any of the company-specific risk be diversified away by investing in both GM and 786 Investment 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 786 Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and 786 Investment Limited, you can compare the effects of market volatilities on GM and 786 Investment 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 786 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and 786 Investment.

Diversification Opportunities for GM and 786 Investment

-0.24

Correlation Coefficient

GM  786 Investment

Very good diversification

The 3 months correlation between GM and 786 is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and 786 Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 786 Investment 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 786 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 786 Investment has no effect on the direction of GM i.e., GM and 786 Investment go up and down completely randomly.

Pair Corralation between GM and 786 Investment

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the 786 Investment. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.47 times less risky than 786 Investment. The stock trades about -0.01 of its potential returns per unit of risk. The 786 Investment Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  692.00  in 786 Investment Limited on December 19, 2024 and sell it today you would earn a total of  188.00  from holding 786 Investment Limited or generate 27.17% return on investment over 90 days.

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

General Motors  vs.  786 Investment Limited

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.

786 Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 786 Investment Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, 786 Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and 786 Investment

The main advantage of trading using opposite GM and 786 Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, 786 Investment 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 786 Investment will offset losses from the drop in 786 Investment's long position.

The idea behind General Motors and 786 Investment Limited 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.