Correlation Between GM and InspireMD

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

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

Diversification Opportunities for GM and InspireMD

-0.34

Correlation Coefficient

GM  InspireMD

Very good diversification

The 3 months correlation between GM and InspireMD is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and InspireMD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InspireMD 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 InspireMD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InspireMD has no effect on the direction of GM i.e., GM and InspireMD go up and down completely randomly.

Pair Corralation between GM and InspireMD

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the InspireMD. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.72 times less risky than InspireMD. The stock trades about -0.03 of its potential returns per unit of risk. The InspireMD is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  286.00  in InspireMD on December 24, 2024 and sell it today you would lose (12.00) from holding InspireMD or give up 4.2% 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.  InspireMD

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.

InspireMD

Risk-Adjusted Performance

Very Weak

Over the last 90 days InspireMD has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, InspireMD is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GM and InspireMD

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

The idea behind General Motors and InspireMD 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.