Correlation Between GM and Janus Global

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

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

Diversification Opportunities for GM and Janus Global

0.23

Correlation Coefficient

GM  Janus Global

Modest diversification

The 3 months correlation between GM and Janus is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Janus Global Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janus Global Allocation 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 Janus Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Global Allocation has no effect on the direction of GM i.e., GM and Janus Global go up and down completely randomly.

Pair Corralation between GM and Janus Global

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.12 times more return on investment than Janus Global. However, GM is 2.12 times more volatile than Janus Global Allocation. It trades about -0.01 of its potential returns per unit of risk. Janus Global Allocation is currently generating about -0.08 per unit of risk. If you would invest  5,404  in General Motors on December 25, 2024 and sell it today you would lose (145.00) from holding General Motors or give up 2.68% of portfolio value over 90 days.

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

General Motors  vs.  Janus Global Allocation

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.

Janus Global Allocation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Janus Global Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Janus Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Janus Global

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

The idea behind General Motors and Janus Global Allocation 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..