Correlation Between GM and UBS CH

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

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

Diversification Opportunities for GM and UBS CH

-0.72

Correlation Coefficient

GM  UBS CH

Pay attention - limited upside

The 3 months correlation between GM and UBS is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and UBS CH Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS CH Property 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 UBS CH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS CH Property has no effect on the direction of GM i.e., GM and UBS CH go up and down completely randomly.

Pair Corralation between GM and UBS CH

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the UBS CH. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.05 times less risky than UBS CH. The stock trades about -0.12 of its potential returns per unit of risk. The UBS CH Property is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,335  in UBS CH Property on September 28, 2024 and sell it today you would earn a total of  35.00  from holding UBS CH Property or generate 2.62% return on investment over 90 days.

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

General Motors  vs.  UBS CH Property

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.

UBS CH Property

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UBS CH Property has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly stable basic indicators, UBS CH is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GM and UBS CH

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

The idea behind General Motors and UBS CH Property 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.