Correlation Between GM and Europower Enerji

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

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

Diversification Opportunities for GM and Europower Enerji

0.8

Correlation Coefficient

GM  Europower Enerji

Very poor diversification

The 3 months correlation between GM and Europower is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Europower Enerji ve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europower Enerji 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 Europower Enerji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europower Enerji has no effect on the direction of GM i.e., GM and Europower Enerji go up and down completely randomly.

Pair Corralation between GM and Europower Enerji

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.72 times more return on investment than Europower Enerji. However, General Motors is 1.39 times less risky than Europower Enerji. It trades about 0.1 of its potential returns per unit of risk. Europower Enerji ve is currently generating about -0.05 per unit of risk. If you would invest  2,863  in General Motors on September 19, 2024 and sell it today you would earn a total of  2,136  from holding General Motors or generate 74.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.66%
Values	Daily Returns

General Motors  vs.  Europower Enerji ve

General Motors

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Europower Enerji

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Europower Enerji ve are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Europower Enerji demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Europower Enerji

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

The idea behind General Motors and Europower Enerji ve 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.