Correlation Between GM and Ferrari NV

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

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

Diversification Opportunities for GM and Ferrari NV

-0.59

Correlation Coefficient

GM  Ferrari NV

Excellent diversification

The 3 months correlation between GM and Ferrari is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV 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 Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of GM i.e., GM and Ferrari NV go up and down completely randomly.

Pair Corralation between GM and Ferrari NV

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Ferrari NV. In addition to that, GM is 1.22 times more volatile than Ferrari NV. It trades about -0.13 of its total potential returns per unit of risk. Ferrari NV is currently generating about 0.15 per unit of volatility. If you would invest  43,416  in Ferrari NV on November 28, 2024 and sell it today you would earn a total of  6,506  from holding Ferrari NV or generate 14.99% return on investment over 90 days.

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

General Motors  vs.  Ferrari NV

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.

Ferrari NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrari NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Ferrari NV exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Ferrari NV

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

The idea behind General Motors and Ferrari NV 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.