Correlation Between GM and Rottneros

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

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

Diversification Opportunities for GM and Rottneros

-0.65

Correlation Coefficient

GM  Rottneros

Excellent diversification

The 3 months correlation between GM and Rottneros is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Rottneros AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rottneros AB 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 Rottneros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rottneros AB has no effect on the direction of GM i.e., GM and Rottneros go up and down completely randomly.

Pair Corralation between GM and Rottneros

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.5 times more return on investment than Rottneros. However, GM is 1.5 times more volatile than Rottneros AB. It trades about 0.05 of its potential returns per unit of risk. Rottneros AB is currently generating about -0.09 per unit of risk. If you would invest  4,570  in General Motors on September 24, 2024 and sell it today you would earn a total of  611.00  from holding General Motors or generate 13.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.4%
Values	Daily Returns

General Motors  vs.  Rottneros AB

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rottneros AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rottneros AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with GM and Rottneros

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

The idea behind General Motors and Rottneros AB 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.