Correlation Between GM and InsuraGuest Technologies

Can any of the company-specific risk be diversified away by investing in both GM and InsuraGuest 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 InsuraGuest 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 InsuraGuest Technologies, you can compare the effects of market volatilities on GM and InsuraGuest 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 InsuraGuest Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and InsuraGuest Technologies.

Diversification Opportunities for GM and InsuraGuest Technologies

-0.39

Correlation Coefficient

GM  InsuraGuest Technologies

Very good diversification

The 3 months correlation between GM and InsuraGuest is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and InsuraGuest Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InsuraGuest 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 InsuraGuest Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InsuraGuest Technologies has no effect on the direction of GM i.e., GM and InsuraGuest Technologies go up and down completely randomly.

Pair Corralation between GM and InsuraGuest Technologies

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the InsuraGuest Technologies. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 5.17 times less risky than InsuraGuest Technologies. The stock trades about -0.03 of its potential returns per unit of risk. The InsuraGuest Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.50  in InsuraGuest Technologies on December 21, 2024 and sell it today you would earn a total of  0.50  from holding InsuraGuest Technologies or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

General Motors  vs.  InsuraGuest Technologies

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.

InsuraGuest Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in InsuraGuest Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, InsuraGuest Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and InsuraGuest Technologies

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

The idea behind General Motors and InsuraGuest 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.