Correlation Between GM and Engie SA

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

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

Diversification Opportunities for GM and Engie SA

-0.44

Correlation Coefficient

GM  Engie SA

Very good diversification

The 3 months correlation between GM and Engie is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Engie SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie SA 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 Engie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie SA has no effect on the direction of GM i.e., GM and Engie SA go up and down completely randomly.

Pair Corralation between GM and Engie SA

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Engie SA. In addition to that, GM is 1.16 times more volatile than Engie SA. It trades about -0.07 of its total potential returns per unit of risk. Engie SA is currently generating about -0.03 per unit of volatility. If you would invest  1,517  in Engie SA on September 27, 2024 and sell it today you would lose (12.00) from holding Engie SA or give up 0.79% of portfolio value over 90 days.

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

General Motors  vs.  Engie SA

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.

Engie SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engie SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Engie SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and Engie SA

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

The idea behind General Motors and Engie SA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..