Correlation Between GM and STANDARD SUPPLY

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

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

Diversification Opportunities for GM and STANDARD SUPPLY

-0.79

Correlation Coefficient

GM  STANDARD SUPPLY

Pay attention - limited upside

The 3 months correlation between GM and STANDARD is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and STANDARD SUPPLY NK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STANDARD SUPPLY NK 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 STANDARD SUPPLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STANDARD SUPPLY NK has no effect on the direction of GM i.e., GM and STANDARD SUPPLY go up and down completely randomly.

Pair Corralation between GM and STANDARD SUPPLY

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.12 times more return on investment than STANDARD SUPPLY. However, GM is 1.12 times more volatile than STANDARD SUPPLY NK. It trades about -0.12 of its potential returns per unit of risk. STANDARD SUPPLY NK is currently generating about -0.48 per unit of risk. If you would invest  5,499  in General Motors on September 20, 2024 and sell it today you would lose (384.00) from holding General Motors or give up 6.98% of portfolio value over 90 days.

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

General Motors  vs.  STANDARD SUPPLY NK

General Motors

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

STANDARD SUPPLY NK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STANDARD SUPPLY NK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators 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 STANDARD SUPPLY

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

The idea behind General Motors and STANDARD SUPPLY NK 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.