Correlation Between GM and Emera

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

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

Diversification Opportunities for GM and Emera

-0.19

Correlation Coefficient

GM  Emera

Good diversification

The 3 months correlation between GM and Emera is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Emera Pref F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Pref F 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 Emera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Pref F has no effect on the direction of GM i.e., GM and Emera go up and down completely randomly.

Pair Corralation between GM and Emera

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Emera. In addition to that, GM is 2.67 times more volatile than Emera Pref F. It trades about -0.07 of its total potential returns per unit of risk. Emera Pref F is currently generating about 0.08 per unit of volatility. If you would invest  2,100  in Emera Pref F on December 27, 2024 and sell it today you would earn a total of  102.00  from holding Emera Pref F or generate 4.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

General Motors  vs.  Emera Pref F

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Emera Pref F

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Pref F are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Emera is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Emera

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

The idea behind General Motors and Emera Pref F 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.