Correlation Between GM and BB Renda

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

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

Diversification Opportunities for GM and BB Renda

0.23

Correlation Coefficient

GM  BB Renda

Modest diversification

The 3 months correlation between GM and BBRC11 is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BB Renda Corporativa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Renda Corporativa 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 BB Renda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Renda Corporativa has no effect on the direction of GM i.e., GM and BB Renda go up and down completely randomly.

Pair Corralation between GM and BB Renda

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.78 times more return on investment than BB Renda. However, GM is 1.78 times more volatile than BB Renda Corporativa. It trades about 0.05 of its potential returns per unit of risk. BB Renda Corporativa is currently generating about -0.01 per unit of risk. If you would invest  4,604  in General Motors on October 7, 2024 and sell it today you would earn a total of  573.00  from holding General Motors or generate 12.45% return on investment over 90 days.

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

General Motors  vs.  BB Renda Corporativa

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.

BB Renda Corporativa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BB Renda Corporativa has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with GM and BB Renda

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

The idea behind General Motors and BB Renda Corporativa 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.