Correlation Between GM and Newmark

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

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

Diversification Opportunities for GM and Newmark

-0.3

Correlation Coefficient

GM  Newmark

Very good diversification

The 3 months correlation between GM and Newmark is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Newmark Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmark 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 Newmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmark Group has no effect on the direction of GM i.e., GM and Newmark go up and down completely randomly.

Pair Corralation between GM and Newmark

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Newmark. In addition to that, GM is 1.03 times more volatile than Newmark Group. It trades about -0.03 of its total potential returns per unit of risk. Newmark Group is currently generating about 0.0 per unit of volatility. If you would invest  1,298  in Newmark Group on December 26, 2024 and sell it today you would lose (30.00) from holding Newmark Group or give up 2.31% of portfolio value over 90 days.

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

General Motors  vs.  Newmark Group

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 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.

Newmark Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newmark Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Newmark is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GM and Newmark

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

The idea behind General Motors and Newmark 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.