Correlation Between GM and Genus Paper

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

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

Diversification Opportunities for GM and Genus Paper

-0.8

Correlation Coefficient

GM  Genus Paper

Pay attention - limited upside

The 3 months correlation between GM and Genus is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Genus Paper Boards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genus Paper Boards 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 Genus Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genus Paper Boards has no effect on the direction of GM i.e., GM and Genus Paper go up and down completely randomly.

Pair Corralation between GM and Genus Paper

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.96 times more return on investment than Genus Paper. However, General Motors is 1.04 times less risky than Genus Paper. It trades about 0.09 of its potential returns per unit of risk. Genus Paper Boards is currently generating about -0.06 per unit of risk. If you would invest  4,591  in General Motors on October 8, 2024 and sell it today you would earn a total of  586.00  from holding General Motors or generate 12.76% return on investment over 90 days.

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

General Motors  vs.  Genus Paper Boards

General Motors

Risk-Adjusted Performance

7 of 100

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.

Genus Paper Boards

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genus Paper Boards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with GM and Genus Paper

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

The idea behind General Motors and Genus Paper Boards 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.