Correlation Between GM and Bank Of Cyprus

Can any of the company-specific risk be diversified away by investing in both GM and Bank Of Cyprus 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 Of Cyprus 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 Of Cyprus, you can compare the effects of market volatilities on GM and Bank Of Cyprus 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 Of Cyprus. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Bank Of Cyprus.

Diversification Opportunities for GM and Bank Of Cyprus

0.05

Correlation Coefficient

GM  Bank Of Cyprus

Significant diversification

The 3 months correlation between GM and Bank is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bank Of Cyprus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of Cyprus 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 Of Cyprus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of Cyprus has no effect on the direction of GM i.e., GM and Bank Of Cyprus go up and down completely randomly.

Pair Corralation between GM and Bank Of Cyprus

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.17 times more return on investment than Bank Of Cyprus. However, GM is 1.17 times more volatile than Bank Of Cyprus. It trades about -0.07 of its potential returns per unit of risk. Bank Of Cyprus is currently generating about -0.21 per unit of risk. If you would invest  5,547  in General Motors on September 29, 2024 and sell it today you would lose (119.00) from holding General Motors or give up 2.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

General Motors  vs.  Bank Of Cyprus

General Motors

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 11 (%) 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 Of Cyprus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Of Cyprus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bank Of Cyprus is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and Bank Of Cyprus

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

The idea behind General Motors and Bank Of Cyprus 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.