Correlation Between GM and Eldav L

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

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

Diversification Opportunities for GM and Eldav L

-0.35

Correlation Coefficient

GM  Eldav L

Very good diversification

The 3 months correlation between GM and Eldav is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Eldav L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eldav L 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 Eldav L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eldav L has no effect on the direction of GM i.e., GM and Eldav L go up and down completely randomly.

Pair Corralation between GM and Eldav L

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Eldav L. In addition to that, GM is 1.15 times more volatile than Eldav L. It trades about -0.03 of its total potential returns per unit of risk. Eldav L is currently generating about -0.01 per unit of volatility. If you would invest  26,420  in Eldav L on December 26, 2024 and sell it today you would lose (610.00) from holding Eldav L or give up 2.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.61%
Values	Daily Returns

General Motors  vs.  Eldav L

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 very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Eldav L

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eldav L has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eldav L is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Eldav L

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

The idea behind General Motors and Eldav L 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.