Correlation Between GM and UltraTech Cement

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

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

Diversification Opportunities for GM and UltraTech Cement

0.0

Correlation Coefficient

GM  UltraTech Cement

Pay attention - limited upside

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

Pair Corralation between GM and UltraTech Cement

If you would invest  5,034  in General Motors on October 20, 2024 and sell it today you would earn a total of  63.00  from holding General Motors or generate 1.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  UltraTech Cement Limited

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 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.

UltraTech Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UltraTech Cement Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, UltraTech Cement is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and UltraTech Cement

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

The idea behind General Motors and UltraTech Cement Limited 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.