Correlation Between GM and Rami Levi

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

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

Diversification Opportunities for GM and Rami Levi

-0.81

Correlation Coefficient

GM  Rami Levi

Pay attention - limited upside

The 3 months correlation between GM and Rami is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Rami Levi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rami Levi 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 Rami Levi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rami Levi has no effect on the direction of GM i.e., GM and Rami Levi go up and down completely randomly.

Pair Corralation between GM and Rami Levi

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Rami Levi. In addition to that, GM is 1.62 times more volatile than Rami Levi. It trades about -0.03 of its total potential returns per unit of risk. Rami Levi is currently generating about 0.04 per unit of volatility. If you would invest  2,424,000  in Rami Levi on December 27, 2024 and sell it today you would earn a total of  66,000  from holding Rami Levi or generate 2.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	83.33%
Values	Daily Returns

General Motors  vs.  Rami Levi

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.

Rami Levi

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rami Levi are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Rami Levi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Rami Levi

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

The idea behind General Motors and Rami Levi 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.