Correlation Between GM and Microlise Group

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

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

Diversification Opportunities for GM and Microlise Group

-0.68

Correlation Coefficient

GM  Microlise Group

Excellent diversification

The 3 months correlation between GM and Microlise is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Microlise Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microlise Group PLC 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 Microlise Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microlise Group PLC has no effect on the direction of GM i.e., GM and Microlise Group go up and down completely randomly.

Pair Corralation between GM and Microlise Group

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.82 times more return on investment than Microlise Group. However, General Motors is 1.22 times less risky than Microlise Group. It trades about 0.06 of its potential returns per unit of risk. Microlise Group PLC is currently generating about -0.06 per unit of risk. If you would invest  4,655  in General Motors on September 12, 2024 and sell it today you would earn a total of  619.00  from holding General Motors or generate 13.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.43%
Values	Daily Returns

General Motors  vs.  Microlise Group PLC

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Microlise Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microlise Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with GM and Microlise Group

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

The idea behind General Motors and Microlise Group PLC 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.