Correlation Between GM and Yulon Finance

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

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

Diversification Opportunities for GM and Yulon Finance

-0.72

Correlation Coefficient

GM  Yulon Finance

Pay attention - limited upside

The 3 months correlation between GM and Yulon is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Yulon Finance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yulon Finance Corp 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 Yulon Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yulon Finance Corp has no effect on the direction of GM i.e., GM and Yulon Finance go up and down completely randomly.

Pair Corralation between GM and Yulon Finance

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Yulon Finance. In addition to that, GM is 1.21 times more volatile than Yulon Finance Corp. It trades about -0.03 of its total potential returns per unit of risk. Yulon Finance Corp is currently generating about 0.13 per unit of volatility. If you would invest  10,200  in Yulon Finance Corp on December 24, 2024 and sell it today you would earn a total of  1,450  from holding Yulon Finance Corp or generate 14.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.33%
Values	Daily Returns

General Motors  vs.  Yulon Finance Corp

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.

Yulon Finance Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yulon Finance Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yulon Finance showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Yulon Finance

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

The idea behind General Motors and Yulon Finance Corp 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.