Correlation Between GM and UBS

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

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

Diversification Opportunities for GM and UBS

0.0

Correlation Coefficient

GM  UBS

Pay attention - limited upside

The 3 months correlation between GM and UBS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and UBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS 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 UBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS has no effect on the direction of GM i.e., GM and UBS go up and down completely randomly.

Pair Corralation between GM and UBS

If you would invest  3,397  in General Motors on September 25, 2024 and sell it today you would earn a total of  1,784  from holding General Motors or generate 52.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

General Motors  vs.  UBS

General Motors

Risk-Adjusted Performance

7 of 100

Modest

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.

UBS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UBS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, UBS is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GM and UBS

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

The idea behind General Motors and UBS 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.