Correlation Between GM and ManpowerGroup

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

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

Diversification Opportunities for GM and ManpowerGroup

0.23

Correlation Coefficient

GM  ManpowerGroup

Modest diversification

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

Pair Corralation between GM and ManpowerGroup

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the ManpowerGroup. In addition to that, GM is 1.48 times more volatile than ManpowerGroup. It trades about -0.07 of its total potential returns per unit of risk. ManpowerGroup is currently generating about 0.04 per unit of volatility. If you would invest  5,683  in ManpowerGroup on December 28, 2024 and sell it today you would earn a total of  183.00  from holding ManpowerGroup or generate 3.22% return on investment over 90 days.

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

General Motors  vs.  ManpowerGroup

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

ManpowerGroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ManpowerGroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ManpowerGroup is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GM and ManpowerGroup

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

The idea behind General Motors and ManpowerGroup 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.