Correlation Between GM and CP ALL

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

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

Diversification Opportunities for GM and CP ALL

-0.04

Correlation Coefficient

GM  CP ALL

Good diversification

The 3 months correlation between GM and CVPBF is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CP ALL Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CP ALL Public 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 CP ALL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CP ALL Public has no effect on the direction of GM i.e., GM and CP ALL go up and down completely randomly.

Pair Corralation between GM and CP ALL

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.57 times more return on investment than CP ALL. However, General Motors is 1.77 times less risky than CP ALL. It trades about -0.12 of its potential returns per unit of risk. CP ALL Public is currently generating about -0.27 per unit of risk. If you would invest  5,538  in General Motors on September 28, 2024 and sell it today you would lose (187.00) from holding General Motors or give up 3.38% of portfolio value over 90 days.

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

General Motors  vs.  CP ALL Public

General Motors

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 10 (%) 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.

CP ALL Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GM and CP ALL

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

The idea behind General Motors and CP ALL Public 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.