Correlation Between GM and RNI Negcios

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

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

Diversification Opportunities for GM and RNI Negcios

-0.64

Correlation Coefficient

GM  RNI Negcios

Excellent diversification

The 3 months correlation between GM and RNI is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and RNI Negcios Imobilirios in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RNI Negcios Imobilirios 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 RNI Negcios. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RNI Negcios Imobilirios has no effect on the direction of GM i.e., GM and RNI Negcios go up and down completely randomly.

Pair Corralation between GM and RNI Negcios

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the RNI Negcios. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.92 times less risky than RNI Negcios. The stock trades about -0.02 of its potential returns per unit of risk. The RNI Negcios Imobilirios is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  210.00  in RNI Negcios Imobilirios on December 25, 2024 and sell it today you would earn a total of  49.00  from holding RNI Negcios Imobilirios or generate 23.33% return on investment over 90 days.

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

General Motors  vs.  RNI Negcios Imobilirios

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 very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

RNI Negcios Imobilirios

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RNI Negcios Imobilirios are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, RNI Negcios unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and RNI Negcios

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

The idea behind General Motors and RNI Negcios Imobilirios 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.