Correlation Between GM and Rizal Commercial

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

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

Diversification Opportunities for GM and Rizal Commercial

-0.29

Correlation Coefficient

GM  Rizal Commercial

Very good diversification

The 3 months correlation between GM and Rizal is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Rizal Commercial Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rizal Commercial Banking 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 Rizal Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rizal Commercial Banking has no effect on the direction of GM i.e., GM and Rizal Commercial go up and down completely randomly.

Pair Corralation between GM and Rizal Commercial

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Rizal Commercial. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.04 times less risky than Rizal Commercial. The stock trades about -0.01 of its potential returns per unit of risk. The Rizal Commercial Banking is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,445  in Rizal Commercial Banking on December 1, 2024 and sell it today you would earn a total of  135.00  from holding Rizal Commercial Banking or generate 5.52% return on investment over 90 days.

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

General Motors  vs.  Rizal Commercial Banking

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Rizal Commercial Banking

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rizal Commercial Banking are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Rizal Commercial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and Rizal Commercial

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

The idea behind General Motors and Rizal Commercial Banking 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.