Correlation Between GM and Dana Large

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Can any of the company-specific risk be diversified away by investing in both GM and Dana Large 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 Dana Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Dana Large Cap, you can compare the effects of market volatilities on GM and Dana Large 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 Dana Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Dana Large.

Diversification Opportunities for GM and Dana Large

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between GM and Dana is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Dana Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Large Cap 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 Dana Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Large Cap has no effect on the direction of GM i.e., GM and Dana Large go up and down completely randomly.

Pair Corralation between GM and Dana Large

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.19 times more return on investment than Dana Large. However, GM is 1.19 times more volatile than Dana Large Cap. It trades about 0.06 of its potential returns per unit of risk. Dana Large Cap is currently generating about -0.04 per unit of risk. If you would invest  4,673  in General Motors on September 30, 2024 and sell it today you would earn a total of  755.00  from holding General Motors or generate 16.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Dana Large Cap

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
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.
Dana Large Cap 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Dana Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

GM and Dana Large Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Dana Large

The main advantage of trading using opposite GM and Dana Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Dana Large 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 Dana Large will offset losses from the drop in Dana Large's long position.
The idea behind General Motors and Dana Large Cap 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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