Correlation Between GM and Qualcomm

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

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

Diversification Opportunities for GM and Qualcomm

0.3

Correlation Coefficient

GM  Qualcomm

Weak diversification

The 3 months correlation between GM and Qualcomm is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Qualcomm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qualcomm 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 Qualcomm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qualcomm has no effect on the direction of GM i.e., GM and Qualcomm go up and down completely randomly.

Pair Corralation between GM and Qualcomm

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Qualcomm. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.37 times less risky than Qualcomm. The stock trades about -0.02 of its potential returns per unit of risk. The Qualcomm is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,758  in Qualcomm on September 27, 2024 and sell it today you would earn a total of  342.00  from holding Qualcomm or generate 4.41% return on investment over 90 days.

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

General Motors  vs.  Qualcomm

General Motors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 8 (%) 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.

Qualcomm

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qualcomm are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qualcomm may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Qualcomm

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

The idea behind General Motors and Qualcomm 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..