Correlation Between GM and UMWELTBANK

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

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

Diversification Opportunities for GM and UMWELTBANK

0.5

Correlation Coefficient

GM  UMWELTBANK

Very weak diversification

The 3 months correlation between GM and UMWELTBANK is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and UMWELTBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMWELTBANK 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 UMWELTBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMWELTBANK has no effect on the direction of GM i.e., GM and UMWELTBANK go up and down completely randomly.

Pair Corralation between GM and UMWELTBANK

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.82 times more return on investment than UMWELTBANK. However, General Motors is 1.21 times less risky than UMWELTBANK. It trades about 0.04 of its potential returns per unit of risk. UMWELTBANK is currently generating about -0.05 per unit of risk. If you would invest  3,545  in General Motors on October 15, 2024 and sell it today you would earn a total of  1,440  from holding General Motors or generate 40.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.8%
Values	Daily Returns

General Motors  vs.  UMWELTBANK

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) 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 February 2025.

UMWELTBANK

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UMWELTBANK are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, UMWELTBANK may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GM and UMWELTBANK

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

The idea behind General Motors and UMWELTBANK 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.