Correlation Between GM and Unicharm

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

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

Diversification Opportunities for GM and Unicharm

0.14

Correlation Coefficient

GM  Unicharm

Average diversification

The 3 months correlation between GM and Unicharm is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Unicharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unicharm 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 Unicharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unicharm has no effect on the direction of GM i.e., GM and Unicharm go up and down completely randomly.

Pair Corralation between GM and Unicharm

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.72 times more return on investment than Unicharm. However, General Motors is 1.38 times less risky than Unicharm. It trades about -0.08 of its potential returns per unit of risk. Unicharm is currently generating about -0.19 per unit of risk. If you would invest  5,256  in General Motors on October 22, 2024 and sell it today you would lose (159.00) from holding General Motors or give up 3.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.21%
Values	Daily Returns

General Motors  vs.  Unicharm

General Motors

Risk-Adjusted Performance

0 of 100

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 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.

Unicharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unicharm has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GM and Unicharm

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

The idea behind General Motors and Unicharm 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.