Correlation Between GM and Bank Mestika

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

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

Diversification Opportunities for GM and Bank Mestika

-0.56

Correlation Coefficient

GM  Bank Mestika

Excellent diversification

The 3 months correlation between GM and Bank is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bank Mestika Dharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Mestika Dharma 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 Bank Mestika. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Mestika Dharma has no effect on the direction of GM i.e., GM and Bank Mestika go up and down completely randomly.

Pair Corralation between GM and Bank Mestika

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.1 times more return on investment than Bank Mestika. However, GM is 1.1 times more volatile than Bank Mestika Dharma. It trades about 0.07 of its potential returns per unit of risk. Bank Mestika Dharma is currently generating about 0.01 per unit of risk. If you would invest  3,536  in General Motors on August 31, 2024 and sell it today you would earn a total of  2,023  from holding General Motors or generate 57.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Bank Mestika Dharma

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Bank Mestika Dharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Mestika Dharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Mestika is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GM and Bank Mestika

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

The idea behind General Motors and Bank Mestika Dharma 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 Commodity Directory module to find actively traded commodities issued by global exchanges.