Correlation Between GM and TTW Public

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

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

Diversification Opportunities for GM and TTW Public

-0.74

Correlation Coefficient

GM  TTW Public

Pay attention - limited upside

The 3 months correlation between GM and TTW is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and TTW Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTW Public 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 TTW Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTW Public has no effect on the direction of GM i.e., GM and TTW Public go up and down completely randomly.

Pair Corralation between GM and TTW Public

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the TTW Public. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.27 times less risky than TTW Public. The stock trades about -0.03 of its potential returns per unit of risk. The TTW Public is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  24.00  in TTW Public on October 1, 2024 and sell it today you would earn a total of  1.00  from holding TTW Public or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

General Motors  vs.  TTW Public

General Motors

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 11 (%) 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.

TTW Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TTW Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TTW Public is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and TTW Public

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

The idea behind General Motors and TTW Public 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 Commodity Directory module to find actively traded commodities issued by global exchanges.