Correlation Between GM and Sipp Industries

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

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

Diversification Opportunities for GM and Sipp Industries

-0.38

Correlation Coefficient

GM  Sipp Industries

Very good diversification

The 3 months correlation between GM and Sipp is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sipp Industries New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sipp Industries New 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 Sipp Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sipp Industries New has no effect on the direction of GM i.e., GM and Sipp Industries go up and down completely randomly.

Pair Corralation between GM and Sipp Industries

Allowing for the 90-day total investment horizon GM is expected to generate 13.77 times less return on investment than Sipp Industries. But when comparing it to its historical volatility, General Motors is 8.64 times less risky than Sipp Industries. It trades about 0.04 of its potential returns per unit of risk. Sipp Industries New is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.20  in Sipp Industries New on December 2, 2024 and sell it today you would lose (0.10) from holding Sipp Industries New or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

General Motors  vs.  Sipp Industries New

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Sipp Industries New

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sipp Industries New are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Sipp Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Sipp Industries

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

The idea behind General Motors and Sipp Industries New 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.