Correlation Between GM and Sigiriya Village

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

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

Diversification Opportunities for GM and Sigiriya Village

-0.7

Correlation Coefficient

GM  Sigiriya Village

Excellent diversification

The 3 months correlation between GM and Sigiriya is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sigiriya Village Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigiriya Village Hotels 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 Sigiriya Village. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigiriya Village Hotels has no effect on the direction of GM i.e., GM and Sigiriya Village go up and down completely randomly.

Pair Corralation between GM and Sigiriya Village

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.42 times more return on investment than Sigiriya Village. However, General Motors is 2.4 times less risky than Sigiriya Village. It trades about -0.1 of its potential returns per unit of risk. Sigiriya Village Hotels is currently generating about -0.08 per unit of risk. If you would invest  4,790  in General Motors on December 4, 2024 and sell it today you would lose (208.00) from holding General Motors or give up 4.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

General Motors  vs.  Sigiriya Village Hotels

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sigiriya Village Hotels

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sigiriya Village Hotels are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sigiriya Village sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Sigiriya Village

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

The idea behind General Motors and Sigiriya Village Hotels 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.