Correlation Between GM and Reliance Securities

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

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

Diversification Opportunities for GM and Reliance Securities

0.51

Correlation Coefficient

GM  Reliance Securities

Very weak diversification

The 3 months correlation between GM and Reliance is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Reliance Securities Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Securities Tbk 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 Reliance Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Securities Tbk has no effect on the direction of GM i.e., GM and Reliance Securities go up and down completely randomly.

Pair Corralation between GM and Reliance Securities

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.36 times more return on investment than Reliance Securities. However, General Motors is 2.79 times less risky than Reliance Securities. It trades about -0.06 of its potential returns per unit of risk. Reliance Securities Tbk is currently generating about -0.04 per unit of risk. If you would invest  5,352  in General Motors on December 28, 2024 and sell it today you would lose (632.00) from holding General Motors or give up 11.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

General Motors  vs.  Reliance Securities Tbk

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.

Reliance Securities Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Securities Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with GM and Reliance Securities

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

The idea behind General Motors and Reliance Securities Tbk 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.