Correlation Between GM and Barrow Hanley

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

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

Diversification Opportunities for GM and Barrow Hanley

-0.51

Correlation Coefficient

GM  Barrow Hanley

Excellent diversification

The 3 months correlation between GM and Barrow is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Barrow Hanley Concentrated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrow Hanley Concen 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 Barrow Hanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrow Hanley Concen has no effect on the direction of GM i.e., GM and Barrow Hanley go up and down completely randomly.

Pair Corralation between GM and Barrow Hanley

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Barrow Hanley. In addition to that, GM is 2.45 times more volatile than Barrow Hanley Concentrated. It trades about -0.02 of its total potential returns per unit of risk. Barrow Hanley Concentrated is currently generating about 0.07 per unit of volatility. If you would invest  826.00  in Barrow Hanley Concentrated on December 23, 2024 and sell it today you would earn a total of  32.00  from holding Barrow Hanley Concentrated or generate 3.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Barrow Hanley Concentrated

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.

Barrow Hanley Concen

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barrow Hanley Concentrated are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Barrow Hanley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Barrow Hanley

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

The idea behind General Motors and Barrow Hanley Concentrated 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .