Correlation Between GM and Mmzgx

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

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

Diversification Opportunities for GM and Mmzgx

-0.49

Correlation Coefficient

GM  Mmzgx

Very good diversification

The 3 months correlation between GM and Mmzgx is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mmzgx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mmzgx 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 Mmzgx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mmzgx has no effect on the direction of GM i.e., GM and Mmzgx go up and down completely randomly.

Pair Corralation between GM and Mmzgx

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Mmzgx. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.46 times less risky than Mmzgx. The stock trades about -0.09 of its potential returns per unit of risk. The Mmzgx is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,204  in Mmzgx on September 21, 2024 and sell it today you would lose (3.00) from holding Mmzgx or give up 0.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Mmzgx

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mmzgx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mmzgx has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Mmzgx 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 Mmzgx

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

The idea behind General Motors and Mmzgx 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.