Correlation Between GM and NPF MICRO

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

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

Diversification Opportunities for GM and NPF MICRO

-0.21

Correlation Coefficient

GM  NPF MICRO

Very good diversification

The 3 months correlation between GM and NPF is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NPF MICRO FINANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NPF MICRO FINANCE 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 NPF MICRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NPF MICRO FINANCE has no effect on the direction of GM i.e., GM and NPF MICRO go up and down completely randomly.

Pair Corralation between GM and NPF MICRO

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the NPF MICRO. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.01 times less risky than NPF MICRO. The stock trades about -0.06 of its potential returns per unit of risk. The NPF MICRO FINANCE is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  167.00  in NPF MICRO FINANCE on December 29, 2024 and sell it today you would earn a total of  23.00  from holding NPF MICRO FINANCE or generate 13.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

General Motors  vs.  NPF MICRO FINANCE

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 latest abnormal performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

NPF MICRO FINANCE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NPF MICRO FINANCE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, NPF MICRO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and NPF MICRO

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

The idea behind General Motors and NPF MICRO FINANCE 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.