Correlation Between GM and ENEOS Holdings

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

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

Diversification Opportunities for GM and ENEOS Holdings

-0.19

Correlation Coefficient

GM  ENEOS Holdings

Good diversification

The 3 months correlation between GM and ENEOS is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ENEOS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENEOS Holdings 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 ENEOS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENEOS Holdings has no effect on the direction of GM i.e., GM and ENEOS Holdings go up and down completely randomly.

Pair Corralation between GM and ENEOS Holdings

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.91 times more return on investment than ENEOS Holdings. However, General Motors is 1.1 times less risky than ENEOS Holdings. It trades about 0.05 of its potential returns per unit of risk. ENEOS Holdings is currently generating about 0.03 per unit of risk. If you would invest  4,718  in General Motors on September 14, 2024 and sell it today you would earn a total of  542.00  from holding General Motors or generate 11.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

General Motors  vs.  ENEOS Holdings

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) 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.

ENEOS Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ENEOS Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ENEOS Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and ENEOS Holdings

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

The idea behind General Motors and ENEOS Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..