Correlation Between GM and Rompetrol Rafi

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

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

Diversification Opportunities for GM and Rompetrol Rafi

-0.66

Correlation Coefficient

GM  Rompetrol Rafi

Excellent diversification

The 3 months correlation between GM and Rompetrol is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Rompetrol Rafi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rompetrol Rafi 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 Rompetrol Rafi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rompetrol Rafi has no effect on the direction of GM i.e., GM and Rompetrol Rafi go up and down completely randomly.

Pair Corralation between GM and Rompetrol Rafi

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Rompetrol Rafi. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 3.79 times less risky than Rompetrol Rafi. The stock trades about -0.12 of its potential returns per unit of risk. The Rompetrol Rafi is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6.90  in Rompetrol Rafi on September 28, 2024 and sell it today you would lose (0.15) from holding Rompetrol Rafi or give up 2.17% of portfolio value over 90 days.

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

General Motors  vs.  Rompetrol Rafi

General Motors

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Rompetrol Rafi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rompetrol Rafi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with GM and Rompetrol Rafi

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

The idea behind General Motors and Rompetrol Rafi 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..