Correlation Between GM and ORIX JREIT

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

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

Diversification Opportunities for GM and ORIX JREIT

0.64

Correlation Coefficient

GM  ORIX JREIT

Poor diversification

The 3 months correlation between GM and ORIX is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ORIX JREIT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX JREIT INC 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 ORIX JREIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX JREIT INC has no effect on the direction of GM i.e., GM and ORIX JREIT go up and down completely randomly.

Pair Corralation between GM and ORIX JREIT

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.55 times more return on investment than ORIX JREIT. However, GM is 1.55 times more volatile than ORIX JREIT INC. It trades about 0.05 of its potential returns per unit of risk. ORIX JREIT INC is currently generating about -0.03 per unit of risk. If you would invest  3,297  in General Motors on September 19, 2024 and sell it today you would earn a total of  1,702  from holding General Motors or generate 51.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.22%
Values	Daily Returns

General Motors  vs.  ORIX JREIT INC

General Motors

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

ORIX JREIT INC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ORIX JREIT INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ORIX JREIT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and ORIX JREIT

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

The idea behind General Motors and ORIX JREIT INC 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.