Correlation Between GM and Trelleborg

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

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

Diversification Opportunities for GM and Trelleborg

-0.63

Correlation Coefficient

GM  Trelleborg

Excellent diversification

The 3 months correlation between GM and Trelleborg is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Trelleborg AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trelleborg AB 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 Trelleborg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trelleborg AB has no effect on the direction of GM i.e., GM and Trelleborg go up and down completely randomly.

Pair Corralation between GM and Trelleborg

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Trelleborg. In addition to that, GM is 1.94 times more volatile than Trelleborg AB. It trades about -0.07 of its total potential returns per unit of risk. Trelleborg AB is currently generating about 0.02 per unit of volatility. If you would invest  37,860  in Trelleborg AB on December 29, 2024 and sell it today you would earn a total of  520.00  from holding Trelleborg AB or generate 1.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

General Motors  vs.  Trelleborg AB

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 abnormal 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.

Trelleborg AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trelleborg AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Trelleborg is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Trelleborg

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

The idea behind General Motors and Trelleborg AB 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.