Correlation Between GM and Perception Capital

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

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

Diversification Opportunities for GM and Perception Capital

0.62

Correlation Coefficient

GM  Perception Capital

Poor diversification

The 3 months correlation between GM and Perception is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Perception Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perception Capital Corp 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 Perception Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perception Capital Corp has no effect on the direction of GM i.e., GM and Perception Capital go up and down completely randomly.

Pair Corralation between GM and Perception Capital

If you would invest  4,676  in General Motors on September 16, 2024 and sell it today you would earn a total of  577.00  from holding General Motors or generate 12.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

General Motors  vs.  Perception Capital Corp

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Perception Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perception Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Perception Capital is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GM and Perception Capital

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

The idea behind General Motors and Perception Capital Corp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.