Correlation Between GM and MOLSON

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

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

Diversification Opportunities for GM and MOLSON

-0.49

Correlation Coefficient

GM  MOLSON

Very good diversification

The 3 months correlation between GM and MOLSON is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and MOLSON RS BREWING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOLSON RS BREWING 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 MOLSON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOLSON RS BREWING has no effect on the direction of GM i.e., GM and MOLSON go up and down completely randomly.

Pair Corralation between GM and MOLSON

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the MOLSON. In addition to that, GM is 11.19 times more volatile than MOLSON RS BREWING. It trades about -0.1 of its total potential returns per unit of risk. MOLSON RS BREWING is currently generating about 0.04 per unit of volatility. If you would invest  9,743  in MOLSON RS BREWING on November 29, 2024 and sell it today you would earn a total of  47.00  from holding MOLSON RS BREWING or generate 0.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

General Motors  vs.  MOLSON RS BREWING

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

MOLSON RS BREWING

Risk-Adjusted Performance

Insignificant

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

Pair Trading with GM and MOLSON

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

The idea behind General Motors and MOLSON RS BREWING 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.