Correlation Between GM and NATIONAL INVESTMENT

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

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

Diversification Opportunities for GM and NATIONAL INVESTMENT

0.5

Correlation Coefficient

GM  NATIONAL INVESTMENT

Very weak diversification

The 3 months correlation between GM and NATIONAL is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NATIONAL INVESTMENT TRUST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL INVESTMENT TRUST 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 NATIONAL INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATIONAL INVESTMENT TRUST has no effect on the direction of GM i.e., GM and NATIONAL INVESTMENT go up and down completely randomly.

Pair Corralation between GM and NATIONAL INVESTMENT

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.77 times more return on investment than NATIONAL INVESTMENT. However, General Motors is 1.29 times less risky than NATIONAL INVESTMENT. It trades about -0.11 of its potential returns per unit of risk. NATIONAL INVESTMENT TRUST is currently generating about -0.09 per unit of risk. If you would invest  5,324  in General Motors on December 4, 2024 and sell it today you would lose (802.00) from holding General Motors or give up 15.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

General Motors  vs.  NATIONAL INVESTMENT TRUST

General Motors

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

NATIONAL INVESTMENT TRUST

Risk-Adjusted Performance

Very Weak

Over the last 90 days NATIONAL INVESTMENT TRUST has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with GM and NATIONAL INVESTMENT

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

The idea behind General Motors and NATIONAL INVESTMENT TRUST 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.