Correlation Between GM and Suparma Tbk

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

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

Diversification Opportunities for GM and Suparma Tbk

-0.35

Correlation Coefficient

GM  Suparma Tbk

Very good diversification

The 3 months correlation between GM and Suparma is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Suparma Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suparma Tbk 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 Suparma Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suparma Tbk has no effect on the direction of GM i.e., GM and Suparma Tbk go up and down completely randomly.

Pair Corralation between GM and Suparma Tbk

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.65 times more return on investment than Suparma Tbk. However, GM is 1.65 times more volatile than Suparma Tbk. It trades about 0.08 of its potential returns per unit of risk. Suparma Tbk is currently generating about -0.02 per unit of risk. If you would invest  4,803  in General Motors on September 5, 2024 and sell it today you would earn a total of  563.00  from holding General Motors or generate 11.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

General Motors  vs.  Suparma Tbk

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 displayed solid returns over the last few months and may actually be approaching a breakup point.

Suparma Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suparma Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Suparma Tbk is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GM and Suparma Tbk

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

The idea behind General Motors and Suparma Tbk 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.