Correlation Between GM and GBT Technologies

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

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

Diversification Opportunities for GM and GBT Technologies

-0.24

Correlation Coefficient

GM  GBT Technologies

Very good diversification

The 3 months correlation between GM and GBT is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and GBT Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBT Technologies 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 GBT Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBT Technologies has no effect on the direction of GM i.e., GM and GBT Technologies go up and down completely randomly.

Pair Corralation between GM and GBT Technologies

If you would invest  0.02  in GBT Technologies on October 22, 2024 and sell it today you would lose (0.01) from holding GBT Technologies or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

General Motors  vs.  GBT Technologies

General Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

GBT Technologies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GBT Technologies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, GBT Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and GBT Technologies

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

The idea behind General Motors and GBT Technologies 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.