Correlation Between GM and Deka MSCI

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

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

Diversification Opportunities for GM and Deka MSCI

0.6

Correlation Coefficient

GM  Deka MSCI

Poor diversification

The 3 months correlation between GM and Deka is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Deka MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deka MSCI World 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 Deka MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deka MSCI World has no effect on the direction of GM i.e., GM and Deka MSCI go up and down completely randomly.

Pair Corralation between GM and Deka MSCI

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Deka MSCI. In addition to that, GM is 2.29 times more volatile than Deka MSCI World. It trades about -0.1 of its total potential returns per unit of risk. Deka MSCI World is currently generating about -0.12 per unit of volatility. If you would invest  3,716  in Deka MSCI World on October 3, 2024 and sell it today you would lose (52.00) from holding Deka MSCI World or give up 1.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

General Motors  vs.  Deka MSCI World

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.

Deka MSCI World

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deka MSCI World are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Deka MSCI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GM and Deka MSCI

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

The idea behind General Motors and Deka MSCI World 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.