Correlation Between GM and 76720AAG1

Can any of the company-specific risk be diversified away by investing in both GM and 76720AAG1 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 76720AAG1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and RIO TINTO FIN, you can compare the effects of market volatilities on GM and 76720AAG1 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 76720AAG1. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and 76720AAG1.

Diversification Opportunities for GM and 76720AAG1

-0.03

Correlation Coefficient

GM  76720AAG1

Good diversification

The 3 months correlation between GM and 76720AAG1 is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and RIO TINTO FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIO TINTO FIN 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 76720AAG1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIO TINTO FIN has no effect on the direction of GM i.e., GM and 76720AAG1 go up and down completely randomly.

Pair Corralation between GM and 76720AAG1

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the 76720AAG1. In addition to that, GM is 2.19 times more volatile than RIO TINTO FIN. It trades about -0.07 of its total potential returns per unit of risk. RIO TINTO FIN is currently generating about 0.12 per unit of volatility. If you would invest  8,386  in RIO TINTO FIN on December 30, 2024 and sell it today you would earn a total of  614.00  from holding RIO TINTO FIN or generate 7.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.87%
Values	Daily Returns

General Motors  vs.  RIO TINTO FIN

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

RIO TINTO FIN

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RIO TINTO FIN are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, 76720AAG1 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and 76720AAG1

The main advantage of trading using opposite GM and 76720AAG1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, 76720AAG1 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 76720AAG1 will offset losses from the drop in 76720AAG1's long position.

The idea behind General Motors and RIO TINTO FIN 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.