Correlation Between GM and CIMG

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

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

Diversification Opportunities for GM and CIMG

-0.25

Correlation Coefficient

GM  CIMG

Very good diversification

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

Pair Corralation between GM and CIMG

Allowing for the 90-day total investment horizon GM is expected to generate 9.93 times less return on investment than CIMG. But when comparing it to its historical volatility, General Motors is 13.86 times less risky than CIMG. It trades about 0.04 of its potential returns per unit of risk. CIMG Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,100  in CIMG Inc on October 18, 2024 and sell it today you would lose (1,029) from holding CIMG Inc or give up 93.55% of portfolio value over 90 days.

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

General Motors  vs.  CIMG Inc

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CIMG Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIMG Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile primary indicators, CIMG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GM and CIMG

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

The idea behind General Motors and CIMG Inc 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.