Correlation Between GM and Elecnor SA

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

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

Diversification Opportunities for GM and Elecnor SA

-0.19

Correlation Coefficient

GM  Elecnor SA

Good diversification

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

Pair Corralation between GM and Elecnor SA

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.37 times more return on investment than Elecnor SA. However, GM is 1.37 times more volatile than Elecnor SA. It trades about 0.07 of its potential returns per unit of risk. Elecnor SA is currently generating about 0.09 per unit of risk. If you would invest  3,219  in General Motors on December 2, 2024 and sell it today you would earn a total of  1,694  from holding General Motors or generate 52.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.14%
Values	Daily Returns

General Motors  vs.  Elecnor SA

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.

Elecnor SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Elecnor SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Elecnor SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and Elecnor SA

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

The idea behind General Motors and Elecnor SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.