Correlation Between GM and TOLEDO

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

By analyzing existing cross correlation between General Motors and TOLEDO HOSP 5325, you can compare the effects of market volatilities on GM and TOLEDO 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 TOLEDO. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and TOLEDO.

Diversification Opportunities for GM and TOLEDO

-0.09

Correlation Coefficient

GM  TOLEDO

Good diversification

The 3 months correlation between GM and TOLEDO is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and TOLEDO HOSP 5325 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOLEDO HOSP 5325 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 TOLEDO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOLEDO HOSP 5325 has no effect on the direction of GM i.e., GM and TOLEDO go up and down completely randomly.

Pair Corralation between GM and TOLEDO

Allowing for the 90-day total investment horizon GM is expected to generate 68.54 times less return on investment than TOLEDO. But when comparing it to its historical volatility, General Motors is 44.63 times less risky than TOLEDO. It trades about 0.05 of its potential returns per unit of risk. TOLEDO HOSP 5325 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,847  in TOLEDO HOSP 5325 on September 24, 2024 and sell it today you would lose (137.00) from holding TOLEDO HOSP 5325 or give up 1.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.63%
Values	Daily Returns

General Motors  vs.  TOLEDO HOSP 5325

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.

TOLEDO HOSP 5325

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOLEDO HOSP 5325 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for TOLEDO HOSP 5325 investors.

Pair Trading with GM and TOLEDO

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

The idea behind General Motors and TOLEDO HOSP 5325 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.