Correlation Between GM and Telemasters Holdings

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

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

Diversification Opportunities for GM and Telemasters Holdings

-0.45

Correlation Coefficient

GM  Telemasters Holdings

Very good diversification

The 3 months correlation between GM and Telemasters is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Telemasters Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telemasters Holdings 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 Telemasters Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telemasters Holdings has no effect on the direction of GM i.e., GM and Telemasters Holdings go up and down completely randomly.

Pair Corralation between GM and Telemasters Holdings

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Telemasters Holdings. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.27 times less risky than Telemasters Holdings. The stock trades about -0.07 of its potential returns per unit of risk. The Telemasters Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  10,000  in Telemasters Holdings on December 28, 2024 and sell it today you would earn a total of  3,700  from holding Telemasters Holdings or generate 37.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

General Motors  vs.  Telemasters Holdings

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.

Telemasters Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telemasters Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Telemasters Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Telemasters Holdings

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

The idea behind General Motors and Telemasters Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.