Correlation Between GM and Pertamina Geothermal

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

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

Diversification Opportunities for GM and Pertamina Geothermal

0.77

Correlation Coefficient

GM  Pertamina Geothermal

Poor diversification

The 3 months correlation between GM and Pertamina is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Pertamina Geothermal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pertamina Geothermal 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 Pertamina Geothermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pertamina Geothermal has no effect on the direction of GM i.e., GM and Pertamina Geothermal go up and down completely randomly.

Pair Corralation between GM and Pertamina Geothermal

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Pertamina Geothermal. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.47 times less risky than Pertamina Geothermal. The stock trades about -0.13 of its potential returns per unit of risk. The Pertamina Geothermal Energy is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  100,500  in Pertamina Geothermal Energy on November 28, 2024 and sell it today you would lose (8,000) from holding Pertamina Geothermal Energy or give up 7.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

General Motors  vs.  Pertamina Geothermal Energy

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pertamina Geothermal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pertamina Geothermal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with GM and Pertamina Geothermal

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

The idea behind General Motors and Pertamina Geothermal Energy 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.