Correlation Between GM and Sporting Clube

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

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

Diversification Opportunities for GM and Sporting Clube

0.1

Correlation Coefficient

GM  Sporting Clube

Average diversification

The 3 months correlation between GM and Sporting is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sporting Clube de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporting Clube de 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 Sporting Clube. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporting Clube de has no effect on the direction of GM i.e., GM and Sporting Clube go up and down completely randomly.

Pair Corralation between GM and Sporting Clube

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Sporting Clube. In addition to that, GM is 1.89 times more volatile than Sporting Clube de. It trades about -0.11 of its total potential returns per unit of risk. Sporting Clube de is currently generating about -0.1 per unit of volatility. If you would invest  99.00  in Sporting Clube de on September 17, 2024 and sell it today you would lose (3.00) from holding Sporting Clube de or give up 3.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

General Motors  vs.  Sporting Clube de

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) 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.

Sporting Clube de

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sporting Clube de are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sporting Clube is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Sporting Clube

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

The idea behind General Motors and Sporting Clube de 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.