Correlation Between GM and Portillos

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

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

Diversification Opportunities for GM and Portillos

-0.62

Correlation Coefficient

GM  Portillos

Excellent diversification

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

Pair Corralation between GM and Portillos

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Portillos. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.36 times less risky than Portillos. The stock trades about -0.09 of its potential returns per unit of risk. The Portillos is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,448  in Portillos on November 29, 2024 and sell it today you would lose (53.00) from holding Portillos or give up 3.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Portillos

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.

Portillos

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Portillos are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Portillos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Portillos

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

The idea behind General Motors and Portillos 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.

Check out your portfolio center.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.