Correlation Between GM and Stalprodukt

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

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

Diversification Opportunities for GM and Stalprodukt

-0.8

Correlation Coefficient

GM  Stalprodukt

Pay attention - limited upside

The 3 months correlation between GM and Stalprodukt is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Stalprodukt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stalprodukt SA 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 Stalprodukt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stalprodukt SA has no effect on the direction of GM i.e., GM and Stalprodukt go up and down completely randomly.

Pair Corralation between GM and Stalprodukt

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Stalprodukt. In addition to that, GM is 3.3 times more volatile than Stalprodukt SA. It trades about -0.31 of its total potential returns per unit of risk. Stalprodukt SA is currently generating about -0.07 per unit of volatility. If you would invest  21,950  in Stalprodukt SA on September 24, 2024 and sell it today you would lose (250.00) from holding Stalprodukt SA or give up 1.14% of portfolio value over 90 days.

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

General Motors  vs.  Stalprodukt SA

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) 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.

Stalprodukt SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stalprodukt SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with GM and Stalprodukt

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

The idea behind General Motors and Stalprodukt SA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..