Correlation Between GM and Europacific Growth

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

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

Diversification Opportunities for GM and Europacific Growth

-0.78

Correlation Coefficient

GM  Europacific Growth

Pay attention - limited upside

The 3 months correlation between GM and Europacific is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Europacific Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europacific Growth 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 Europacific Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europacific Growth has no effect on the direction of GM i.e., GM and Europacific Growth go up and down completely randomly.

Pair Corralation between GM and Europacific Growth

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Europacific Growth. In addition to that, GM is 3.72 times more volatile than Europacific Growth Fund. It trades about -0.19 of its total potential returns per unit of risk. Europacific Growth Fund is currently generating about -0.02 per unit of volatility. If you would invest  5,713  in Europacific Growth Fund on September 19, 2024 and sell it today you would lose (22.00) from holding Europacific Growth Fund or give up 0.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Europacific Growth Fund

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.

Europacific Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europacific Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Europacific Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Europacific Growth

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

The idea behind General Motors and Europacific Growth Fund 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.