Correlation Between GM and Group 6

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Can any of the company-specific risk be diversified away by investing in both GM and Group 6 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 Group 6 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Group 6 Metals, you can compare the effects of market volatilities on GM and Group 6 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 Group 6. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Group 6.

Diversification Opportunities for GM and Group 6

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between GM and Group is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Group 6 Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group 6 Metals 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 Group 6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group 6 Metals has no effect on the direction of GM i.e., GM and Group 6 go up and down completely randomly.

Pair Corralation between GM and Group 6

If you would invest  5,370  in General Motors on September 6, 2024 and sell it today you would lose (34.00) from holding General Motors or give up 0.63% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Group 6 Metals

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
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.
Group 6 Metals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Group 6 Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Group 6 is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

GM and Group 6 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Group 6

The main advantage of trading using opposite GM and Group 6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Group 6 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 Group 6 will offset losses from the drop in Group 6's long position.
The idea behind General Motors and Group 6 Metals 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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