Correlation Between GM and Collaborative Investment

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

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

Diversification Opportunities for GM and Collaborative Investment

0.08

Correlation Coefficient

GM  Collaborative Investment

Significant diversification

The 3 months correlation between GM and Collaborative is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Collaborative Investment Serie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collaborative Investment 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 Collaborative Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collaborative Investment has no effect on the direction of GM i.e., GM and Collaborative Investment go up and down completely randomly.

Pair Corralation between GM and Collaborative Investment

Allowing for the 90-day total investment horizon General Motors is expected to generate 9.98 times more return on investment than Collaborative Investment. However, GM is 9.98 times more volatile than Collaborative Investment Series. It trades about -0.01 of its potential returns per unit of risk. Collaborative Investment Series is currently generating about -0.16 per unit of risk. If you would invest  4,950  in General Motors on December 1, 2024 and sell it today you would lose (37.00) from holding General Motors or give up 0.75% of portfolio value over 90 days.

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

General Motors  vs.  Collaborative Investment Serie

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.

Collaborative Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Collaborative Investment Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Collaborative Investment is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GM and Collaborative Investment

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

The idea behind General Motors and Collaborative Investment Series 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.