Correlation Between GM and Suzuki

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

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

Diversification Opportunities for GM and Suzuki

-0.03

Correlation Coefficient

GM  Suzuki

Good diversification

The 3 months correlation between GM and Suzuki is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Suzuki Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzuki Motor 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 Suzuki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzuki Motor has no effect on the direction of GM i.e., GM and Suzuki go up and down completely randomly.

Pair Corralation between GM and Suzuki

Allowing for the 90-day total investment horizon GM is expected to generate 1.2 times less return on investment than Suzuki. But when comparing it to its historical volatility, General Motors is 1.31 times less risky than Suzuki. It trades about 0.07 of its potential returns per unit of risk. Suzuki Motor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,066  in Suzuki Motor on September 17, 2024 and sell it today you would earn a total of  121.00  from holding Suzuki Motor or generate 11.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

General Motors  vs.  Suzuki Motor

General Motors

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 5 (%) 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.

Suzuki Motor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Suzuki Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Suzuki reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Suzuki

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

The idea behind General Motors and Suzuki Motor 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.