Correlation Between GM and 887317AS4

Can any of the company-specific risk be diversified away by investing in both GM and 887317AS4 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 887317AS4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and TIME WARNER INC, you can compare the effects of market volatilities on GM and 887317AS4 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 887317AS4. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and 887317AS4.

Diversification Opportunities for GM and 887317AS4

0.3

Correlation Coefficient

GM  887317AS4

Weak diversification

The 3 months correlation between GM and 887317AS4 is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and TIME WARNER INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIME WARNER INC 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 887317AS4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIME WARNER INC has no effect on the direction of GM i.e., GM and 887317AS4 go up and down completely randomly.

Pair Corralation between GM and 887317AS4

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the 887317AS4. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.9 times less risky than 887317AS4. The stock trades about -0.07 of its potential returns per unit of risk. The TIME WARNER INC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,123  in TIME WARNER INC on December 30, 2024 and sell it today you would earn a total of  177.00  from holding TIME WARNER INC or generate 2.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	35.48%
Values	Daily Returns

General Motors  vs.  TIME WARNER INC

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.

TIME WARNER INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TIME WARNER INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 887317AS4 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and 887317AS4

The main advantage of trading using opposite GM and 887317AS4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, 887317AS4 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 887317AS4 will offset losses from the drop in 887317AS4's long position.

The idea behind General Motors and TIME WARNER INC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.