Correlation Between GM and 50249AAK9

Can any of the company-specific risk be diversified away by investing in both GM and 50249AAK9 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 50249AAK9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and LYB 38 01 OCT 60, you can compare the effects of market volatilities on GM and 50249AAK9 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 50249AAK9. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and 50249AAK9.

Diversification Opportunities for GM and 50249AAK9

0.53

Correlation Coefficient

GM  50249AAK9

Very weak diversification

The 3 months correlation between GM and 50249AAK9 is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and LYB 38 01 OCT 60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LYB 38 01 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 50249AAK9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LYB 38 01 has no effect on the direction of GM i.e., GM and 50249AAK9 go up and down completely randomly.

Pair Corralation between GM and 50249AAK9

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the 50249AAK9. In addition to that, GM is 2.04 times more volatile than LYB 38 01 OCT 60. It trades about -0.03 of its total potential returns per unit of risk. LYB 38 01 OCT 60 is currently generating about 0.04 per unit of volatility. If you would invest  6,674  in LYB 38 01 OCT 60 on December 27, 2024 and sell it today you would earn a total of  95.00  from holding LYB 38 01 OCT 60 or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	58.33%
Values	Daily Returns

General Motors  vs.  LYB 38 01 OCT 60

General Motors

Risk-Adjusted Performance

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.

LYB 38 01

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LYB 38 01 OCT 60 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 50249AAK9 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and 50249AAK9

The main advantage of trading using opposite GM and 50249AAK9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, 50249AAK9 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 50249AAK9 will offset losses from the drop in 50249AAK9's long position.

The idea behind General Motors and LYB 38 01 OCT 60 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.