Correlation Between GM and Nationwide Investor

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

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

Diversification Opportunities for GM and Nationwide Investor

0.25

Correlation Coefficient

GM  Nationwide Investor

Modest diversification

The 3 months correlation between GM and Nationwide is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nationwide Investor Destinatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Investor 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 Nationwide Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Investor has no effect on the direction of GM i.e., GM and Nationwide Investor go up and down completely randomly.

Pair Corralation between GM and Nationwide Investor

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.48 times more return on investment than Nationwide Investor. However, GM is 1.48 times more volatile than Nationwide Investor Destinations. It trades about 0.06 of its potential returns per unit of risk. Nationwide Investor Destinations is currently generating about -0.04 per unit of risk. If you would invest  4,646  in General Motors on September 27, 2024 and sell it today you would earn a total of  772.00  from holding General Motors or generate 16.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

General Motors  vs.  Nationwide Investor Destinatio

General Motors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 8 (%) 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.

Nationwide Investor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide Investor Destinations has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with GM and Nationwide Investor

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

The idea behind General Motors and Nationwide Investor Destinations 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.