Correlation Between GM and NewWave GBP

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

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

Diversification Opportunities for GM and NewWave GBP

-0.25

Correlation Coefficient

GM  NewWave GBP

Very good diversification

The 3 months correlation between GM and NewWave is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NewWave GBP Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewWave GBP Currency 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 NewWave GBP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewWave GBP Currency has no effect on the direction of GM i.e., GM and NewWave GBP go up and down completely randomly.

Pair Corralation between GM and NewWave GBP

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.66 times more return on investment than NewWave GBP. However, GM is 2.66 times more volatile than NewWave GBP Currency. It trades about 0.04 of its potential returns per unit of risk. NewWave GBP Currency is currently generating about 0.02 per unit of risk. If you would invest  3,848  in General Motors on October 23, 2024 and sell it today you would earn a total of  1,540  from holding General Motors or generate 40.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

General Motors  vs.  NewWave GBP Currency

General Motors

Risk-Adjusted Performance

0 of 100

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 very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NewWave GBP Currency

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NewWave GBP Currency are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, NewWave GBP 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 NewWave GBP

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

The idea behind General Motors and NewWave GBP Currency 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 Commodity Directory module to find actively traded commodities issued by global exchanges.