Correlation Between GM and Bactiguard Holding

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

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

Diversification Opportunities for GM and Bactiguard Holding

0.21

Correlation Coefficient

GM  Bactiguard Holding

Modest diversification

The 3 months correlation between GM and Bactiguard is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bactiguard Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bactiguard Holding 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 Bactiguard Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bactiguard Holding has no effect on the direction of GM i.e., GM and Bactiguard Holding go up and down completely randomly.

Pair Corralation between GM and Bactiguard Holding

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.7 times more return on investment than Bactiguard Holding. However, General Motors is 1.44 times less risky than Bactiguard Holding. It trades about -0.07 of its potential returns per unit of risk. Bactiguard Holding AB is currently generating about -0.06 per unit of risk. If you would invest  5,352  in General Motors on December 30, 2024 and sell it today you would lose (684.00) from holding General Motors or give up 12.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

General Motors  vs.  Bactiguard Holding AB

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.

Bactiguard Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bactiguard Holding AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GM and Bactiguard Holding

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

The idea behind General Motors and Bactiguard Holding AB 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.