Correlation Between GM and NIBE Industrier

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

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

Diversification Opportunities for GM and NIBE Industrier

-0.4

Correlation Coefficient

GM  NIBE Industrier

Very good diversification

The 3 months correlation between GM and NIBE is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NIBE Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIBE Industrier AB 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 NIBE Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIBE Industrier AB has no effect on the direction of GM i.e., GM and NIBE Industrier go up and down completely randomly.

Pair Corralation between GM and NIBE Industrier

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.74 times more return on investment than NIBE Industrier. However, General Motors is 1.36 times less risky than NIBE Industrier. It trades about -0.07 of its potential returns per unit of risk. NIBE Industrier AB is currently generating about -0.19 per unit of risk. If you would invest  5,547  in General Motors on September 30, 2024 and sell it today you would lose (119.00) from holding General Motors or give up 2.15% of portfolio value over 90 days.

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

General Motors  vs.  NIBE Industrier AB

General Motors

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 11 (%) 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.

NIBE Industrier AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIBE Industrier AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GM and NIBE Industrier

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

The idea behind General Motors and NIBE Industrier AB 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.