Correlation Between GM and MSAD Insurance

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

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

Diversification Opportunities for GM and MSAD Insurance

-0.1

Correlation Coefficient

GM  MSAD Insurance

Good diversification

The 3 months correlation between GM and MSAD is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and MSAD Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSAD Insurance Group 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 MSAD Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSAD Insurance Group has no effect on the direction of GM i.e., GM and MSAD Insurance go up and down completely randomly.

Pair Corralation between GM and MSAD Insurance

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.27 times more return on investment than MSAD Insurance. However, GM is 1.27 times more volatile than MSAD Insurance Group. It trades about 0.09 of its potential returns per unit of risk. MSAD Insurance Group is currently generating about 0.01 per unit of risk. If you would invest  4,620  in General Motors on September 13, 2024 and sell it today you would earn a total of  610.00  from holding General Motors or generate 13.2% return on investment over 90 days.

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

General Motors  vs.  MSAD Insurance Group

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

MSAD Insurance Group

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days MSAD Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, MSAD Insurance 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 MSAD Insurance

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

The idea behind General Motors and MSAD Insurance Group 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.