Correlation Between GM and Bilibili

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

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

Diversification Opportunities for GM and Bilibili

0.18

Correlation Coefficient

GM  Bilibili

Average diversification

The 3 months correlation between GM and Bilibili is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bilibili in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bilibili 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 Bilibili. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bilibili has no effect on the direction of GM i.e., GM and Bilibili go up and down completely randomly.

Pair Corralation between GM and Bilibili

Allowing for the 90-day total investment horizon GM is expected to generate 3.17 times less return on investment than Bilibili. But when comparing it to its historical volatility, General Motors is 2.33 times less risky than Bilibili. It trades about 0.08 of its potential returns per unit of risk. Bilibili is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,726  in Bilibili on September 5, 2024 and sell it today you would earn a total of  603.00  from holding Bilibili or generate 34.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

General Motors  vs.  Bilibili

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) 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.

Bilibili

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bilibili are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Bilibili sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Bilibili

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

The idea behind General Motors and Bilibili 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 Global Correlations module to find global opportunities by holding instruments from different markets.