Correlation Between GM and Expat Poland

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

By analyzing existing cross correlation between General Motors and Expat Poland WIG20, you can compare the effects of market volatilities on GM and Expat Poland 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 Expat Poland. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Expat Poland.

Diversification Opportunities for GM and Expat Poland

-0.53

Correlation Coefficient

GM  Expat Poland

Excellent diversification

The 3 months correlation between GM and Expat is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Expat Poland WIG20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expat Poland WIG20 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 Expat Poland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expat Poland WIG20 has no effect on the direction of GM i.e., GM and Expat Poland go up and down completely randomly.

Pair Corralation between GM and Expat Poland

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Expat Poland. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.36 times less risky than Expat Poland. The stock trades about -0.13 of its potential returns per unit of risk. The Expat Poland WIG20 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  59.00  in Expat Poland WIG20 on September 16, 2024 and sell it today you would earn a total of  2.00  from holding Expat Poland WIG20 or generate 3.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Expat Poland WIG20

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.

Expat Poland WIG20

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Expat Poland WIG20 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Expat Poland 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 Expat Poland

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

The idea behind General Motors and Expat Poland WIG20 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.