Correlation Between GM and B Riley

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

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

Diversification Opportunities for GM and B Riley

-0.5

Correlation Coefficient

GM  B Riley

Very good diversification

The 3 months correlation between GM and RILYK is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and B Riley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Riley Financial 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 B Riley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Riley Financial has no effect on the direction of GM i.e., GM and B Riley go up and down completely randomly.

Pair Corralation between GM and B Riley

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the B Riley. In addition to that, GM is 1.42 times more volatile than B Riley Financial. It trades about -0.01 of its total potential returns per unit of risk. B Riley Financial is currently generating about 0.04 per unit of volatility. If you would invest  1,966  in B Riley Financial on December 26, 2024 and sell it today you would earn a total of  69.00  from holding B Riley Financial or generate 3.51% 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.  B Riley Financial

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.

B Riley Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in B Riley Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, B Riley is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GM and B Riley

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

The idea behind General Motors and B Riley Financial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.