Correlation Between GM and Materialise

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

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

Diversification Opportunities for GM and Materialise

0.7

Correlation Coefficient

GM  Materialise

Poor diversification

The 3 months correlation between GM and Materialise is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Materialise NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materialise NV 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 Materialise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materialise NV has no effect on the direction of GM i.e., GM and Materialise go up and down completely randomly.

Pair Corralation between GM and Materialise

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.68 times more return on investment than Materialise. However, General Motors is 1.48 times less risky than Materialise. It trades about 0.05 of its potential returns per unit of risk. Materialise NV is currently generating about 0.01 per unit of risk. If you would invest  3,312  in General Motors on September 21, 2024 and sell it today you would earn a total of  1,722  from holding General Motors or generate 51.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

General Motors  vs.  Materialise NV

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.

Materialise NV

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal essential indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Materialise

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

The idea behind General Motors and Materialise NV 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..