Correlation Between GM and 62954HAL2

Can any of the company-specific risk be diversified away by investing in both GM and 62954HAL2 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 62954HAL2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and NXPI 3125 15 FEB 42, you can compare the effects of market volatilities on GM and 62954HAL2 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 62954HAL2. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and 62954HAL2.

Diversification Opportunities for GM and 62954HAL2

-0.08

Correlation Coefficient

GM  62954HAL2

Good diversification

The 3 months correlation between GM and 62954HAL2 is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NXPI 3125 15 FEB 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXPI 3125 15 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 62954HAL2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXPI 3125 15 has no effect on the direction of GM i.e., GM and 62954HAL2 go up and down completely randomly.

Pair Corralation between GM and 62954HAL2

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the 62954HAL2. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.2 times less risky than 62954HAL2. The stock trades about -0.14 of its potential returns per unit of risk. The NXPI 3125 15 FEB 42 is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,197  in NXPI 3125 15 FEB 42 on September 13, 2024 and sell it today you would lose (111.00) from holding NXPI 3125 15 FEB 42 or give up 1.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	61.9%
Values	Daily Returns

General Motors  vs.  NXPI 3125 15 FEB 42

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

NXPI 3125 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NXPI 3125 15 FEB 42 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 NXPI 3125 15 FEB 42 investors.

Pair Trading with GM and 62954HAL2

The main advantage of trading using opposite GM and 62954HAL2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, 62954HAL2 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 62954HAL2 will offset losses from the drop in 62954HAL2's long position.

The idea behind General Motors and NXPI 3125 15 FEB 42 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.