Correlation Between GM and EQ Oyj

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

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

Diversification Opportunities for GM and EQ Oyj

-0.46

Correlation Coefficient

GM  EQ Oyj

Very good diversification

The 3 months correlation between GM and EQV1V is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and eQ Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eQ Oyj 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 EQ Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eQ Oyj has no effect on the direction of GM i.e., GM and EQ Oyj go up and down completely randomly.

Pair Corralation between GM and EQ Oyj

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the EQ Oyj. In addition to that, GM is 1.02 times more volatile than eQ Oyj. It trades about -0.05 of its total potential returns per unit of risk. eQ Oyj is currently generating about 0.02 per unit of volatility. If you would invest  1,260  in eQ Oyj on October 8, 2024 and sell it today you would earn a total of  5.00  from holding eQ Oyj or generate 0.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	84.21%
Values	Daily Returns

General Motors  vs.  eQ Oyj

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

eQ Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days eQ Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with GM and EQ Oyj

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

The idea behind General Motors and eQ Oyj 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.