Correlation Between GM and Investo Teva

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

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

Diversification Opportunities for GM and Investo Teva

0.84

Correlation Coefficient

GM  Investo Teva

Very poor diversification

The 3 months correlation between GM and Investo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Investo Teva Tesouro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investo Teva Tesouro 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 Investo Teva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investo Teva Tesouro has no effect on the direction of GM i.e., GM and Investo Teva go up and down completely randomly.

Pair Corralation between GM and Investo Teva

Allowing for the 90-day total investment horizon General Motors is expected to generate 131.36 times more return on investment than Investo Teva. However, GM is 131.36 times more volatile than Investo Teva Tesouro. It trades about 0.08 of its potential returns per unit of risk. Investo Teva Tesouro is currently generating about 2.05 per unit of risk. If you would invest  4,803  in General Motors on September 5, 2024 and sell it today you would earn a total of  563.00  from holding General Motors or generate 11.72% return on investment over 90 days.

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

General Motors  vs.  Investo Teva Tesouro

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.

Investo Teva Tesouro

Risk-Adjusted Performance

96 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Investo Teva Tesouro are ranked lower than 96 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Investo Teva 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 Investo Teva

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

The idea behind General Motors and Investo Teva Tesouro 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.