Correlation Between GM and CORONATION INSURANCE

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

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

Diversification Opportunities for GM and CORONATION INSURANCE

-0.63

Correlation Coefficient

GM  CORONATION INSURANCE

Excellent diversification

The 3 months correlation between GM and CORONATION is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CORONATION INSURANCE PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CORONATION INSURANCE PLC 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 CORONATION INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CORONATION INSURANCE PLC has no effect on the direction of GM i.e., GM and CORONATION INSURANCE go up and down completely randomly.

Pair Corralation between GM and CORONATION INSURANCE

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the CORONATION INSURANCE. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 2.5 times less risky than CORONATION INSURANCE. The stock trades about -0.07 of its potential returns per unit of risk. The CORONATION INSURANCE PLC is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  100.00  in CORONATION INSURANCE PLC on December 1, 2024 and sell it today you would earn a total of  160.00  from holding CORONATION INSURANCE PLC or generate 160.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

General Motors  vs.  CORONATION INSURANCE PLC

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.

CORONATION INSURANCE PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CORONATION INSURANCE PLC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, CORONATION INSURANCE showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and CORONATION INSURANCE

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

The idea behind General Motors and CORONATION INSURANCE PLC 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.