Correlation Between GM and INGERSOLL

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

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

Diversification Opportunities for GM and INGERSOLL

0.15

Correlation Coefficient

GM  INGERSOLL

Average diversification

The 3 months correlation between GM and INGERSOLL is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and INGERSOLL RAND GLOBAL HLDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGERSOLL RAND GLOBAL 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 INGERSOLL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGERSOLL RAND GLOBAL has no effect on the direction of GM i.e., GM and INGERSOLL go up and down completely randomly.

Pair Corralation between GM and INGERSOLL

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the INGERSOLL. In addition to that, GM is 2.52 times more volatile than INGERSOLL RAND GLOBAL HLDG. It trades about -0.16 of its total potential returns per unit of risk. INGERSOLL RAND GLOBAL HLDG is currently generating about 0.07 per unit of volatility. If you would invest  10,241  in INGERSOLL RAND GLOBAL HLDG on September 19, 2024 and sell it today you would earn a total of  101.00  from holding INGERSOLL RAND GLOBAL HLDG or generate 0.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

General Motors  vs.  INGERSOLL RAND GLOBAL HLDG

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 January 2025.

INGERSOLL RAND GLOBAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INGERSOLL RAND GLOBAL HLDG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for INGERSOLL RAND GLOBAL HLDG investors.

Pair Trading with GM and INGERSOLL

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

The idea behind General Motors and INGERSOLL RAND GLOBAL HLDG 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 Transaction History module to view history of all your transactions and understand their impact on performance.