Correlation Between GM and Egyptian Media

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

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

Diversification Opportunities for GM and Egyptian Media

0.84

Correlation Coefficient

GM  Egyptian Media

Very poor diversification

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

Pair Corralation between GM and Egyptian Media

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Egyptian Media. In addition to that, GM is 1.58 times more volatile than Egyptian Media Production. It trades about -0.15 of its total potential returns per unit of risk. Egyptian Media Production is currently generating about -0.2 per unit of volatility. If you would invest  2,649  in Egyptian Media Production on September 15, 2024 and sell it today you would lose (159.00) from holding Egyptian Media Production or give up 6.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	85.71%
Values	Daily Returns

General Motors  vs.  Egyptian Media Production

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.

Egyptian Media Production

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Media Production are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Egyptian Media

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

The idea behind General Motors and Egyptian Media Production 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.