Correlation Between GM and SANTANDER

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

By analyzing existing cross correlation between General Motors and SANTANDER UK 10, you can compare the effects of market volatilities on GM and SANTANDER 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 SANTANDER. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SANTANDER.

Diversification Opportunities for GM and SANTANDER

0.61

Correlation Coefficient

GM  SANTANDER

Poor diversification

The 3 months correlation between GM and SANTANDER is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SANTANDER UK 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANTANDER UK 10 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 SANTANDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANTANDER UK 10 has no effect on the direction of GM i.e., GM and SANTANDER go up and down completely randomly.

Pair Corralation between GM and SANTANDER

Allowing for the 90-day total investment horizon General Motors is expected to generate 6.26 times more return on investment than SANTANDER. However, GM is 6.26 times more volatile than SANTANDER UK 10. It trades about 0.08 of its potential returns per unit of risk. SANTANDER UK 10 is currently generating about 0.15 per unit of risk. If you would invest  4,551  in General Motors on September 1, 2024 and sell it today you would earn a total of  1,008  from holding General Motors or generate 22.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

General Motors  vs.  SANTANDER UK 10

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 weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

SANTANDER UK 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SANTANDER UK 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SANTANDER is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GM and SANTANDER

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

The idea behind General Motors and SANTANDER UK 10 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.