Correlation Between GM and TYCO INTERNATIONAL

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

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

Diversification Opportunities for GM and TYCO INTERNATIONAL

0.0

Correlation Coefficient

GM  TYCO INTERNATIONAL

Pay attention - limited upside

The 3 months correlation between GM and TYCO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and TYCO INTERNATIONAL Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TYCO INTERNATIONAL Plc 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 TYCO INTERNATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TYCO INTERNATIONAL Plc has no effect on the direction of GM i.e., GM and TYCO INTERNATIONAL go up and down completely randomly.

Pair Corralation between GM and TYCO INTERNATIONAL

If you would invest  3,568  in General Motors on October 12, 2024 and sell it today you would earn a total of  1,417  from holding General Motors or generate 39.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

General Motors  vs.  TYCO INTERNATIONAL Plc

General Motors

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

TYCO INTERNATIONAL Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TYCO INTERNATIONAL Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TYCO INTERNATIONAL is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GM and TYCO INTERNATIONAL

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

The idea behind General Motors and TYCO INTERNATIONAL Plc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.