Correlation Between GM and Barrister Energy

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

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

Diversification Opportunities for GM and Barrister Energy

0.44

Correlation Coefficient

GM  Barrister Energy

Very weak diversification

The 3 months correlation between GM and Barrister is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Barrister Energy LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrister Energy LLC 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 Barrister Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrister Energy LLC has no effect on the direction of GM i.e., GM and Barrister Energy go up and down completely randomly.

Pair Corralation between GM and Barrister Energy

Allowing for the 90-day total investment horizon GM is expected to generate 1.85 times less return on investment than Barrister Energy. But when comparing it to its historical volatility, General Motors is 2.69 times less risky than Barrister Energy. It trades about 0.04 of its potential returns per unit of risk. Barrister Energy LLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  213.00  in Barrister Energy LLC on October 22, 2024 and sell it today you would earn a total of  2.00  from holding Barrister Energy LLC or generate 0.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

General Motors  vs.  Barrister Energy LLC

General Motors

Risk-Adjusted Performance

0 of 100

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.

Barrister Energy LLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barrister Energy LLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Barrister Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GM and Barrister Energy

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

The idea behind General Motors and Barrister Energy LLC 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.