Correlation Between GM and Clave Indices

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

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

Diversification Opportunities for GM and Clave Indices

-0.16

Correlation Coefficient

GM  Clave Indices

Good diversification

The 3 months correlation between GM and Clave is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Clave Indices De in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clave Indices De 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 Clave Indices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clave Indices De has no effect on the direction of GM i.e., GM and Clave Indices go up and down completely randomly.

Pair Corralation between GM and Clave Indices

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Clave Indices. In addition to that, GM is 1.85 times more volatile than Clave Indices De. It trades about -0.06 of its total potential returns per unit of risk. Clave Indices De is currently generating about 0.16 per unit of volatility. If you would invest  7,810  in Clave Indices De on December 28, 2024 and sell it today you would earn a total of  1,088  from holding Clave Indices De or generate 13.93% return on investment over 90 days.

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

General Motors  vs.  Clave Indices De

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Clave Indices De

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clave Indices De are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Clave Indices sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Clave Indices

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

The idea behind General Motors and Clave Indices De 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.