Correlation Between GM and GXC

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

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

Diversification Opportunities for GM and GXC

0.0

Correlation Coefficient

GM  GXC

Pay attention - limited upside

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

Pair Corralation between GM and GXC

If you would invest (100.00) in GXC on December 26, 2024 and sell it today you would earn a total of  100.00  from holding GXC or generate -100.0% return on investment over 90 days.

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

General Motors  vs.  GXC

General Motors

Risk-Adjusted Performance

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.

GXC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GM and GXC

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

The idea behind General Motors and GXC 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.