Correlation Between GM and Judges Scientific

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

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

Diversification Opportunities for GM and Judges Scientific

0.22

Correlation Coefficient

GM  Judges Scientific

Modest diversification

The 3 months correlation between GM and Judges is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Judges Scientific Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Judges Scientific Plc 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 Judges Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Judges Scientific Plc has no effect on the direction of GM i.e., GM and Judges Scientific go up and down completely randomly.

Pair Corralation between GM and Judges Scientific

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.16 times more return on investment than Judges Scientific. However, GM is 1.16 times more volatile than Judges Scientific Plc. It trades about -0.03 of its potential returns per unit of risk. Judges Scientific Plc is currently generating about -0.04 per unit of risk. If you would invest  5,414  in General Motors on December 27, 2024 and sell it today you would lose (319.00) from holding General Motors or give up 5.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

General Motors  vs.  Judges Scientific Plc

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.

Judges Scientific Plc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GM and Judges Scientific

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

The idea behind General Motors and Judges Scientific Plc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..