Correlation Between GM and 532457CG1

Can any of the company-specific risk be diversified away by investing in both GM and 532457CG1 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 532457CG1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and LLY 4875 27 FEB 53, you can compare the effects of market volatilities on GM and 532457CG1 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 532457CG1. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and 532457CG1.

Diversification Opportunities for GM and 532457CG1

-0.82

Correlation Coefficient

GM  532457CG1

Pay attention - limited upside

The 3 months correlation between GM and 532457CG1 is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and LLY 4875 27 FEB 53 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LLY 4875 27 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 532457CG1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LLY 4875 27 has no effect on the direction of GM i.e., GM and 532457CG1 go up and down completely randomly.

Pair Corralation between GM and 532457CG1

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the 532457CG1. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.3 times less risky than 532457CG1. The stock trades about -0.3 of its potential returns per unit of risk. The LLY 4875 27 FEB 53 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,487  in LLY 4875 27 FEB 53 on September 24, 2024 and sell it today you would earn a total of  432.00  from holding LLY 4875 27 FEB 53 or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

General Motors  vs.  LLY 4875 27 FEB 53

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) 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.

LLY 4875 27

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LLY 4875 27 FEB 53 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 532457CG1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and 532457CG1

The main advantage of trading using opposite GM and 532457CG1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, 532457CG1 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 532457CG1 will offset losses from the drop in 532457CG1's long position.

The idea behind General Motors and LLY 4875 27 FEB 53 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.