Correlation Between GM and WOLTERS KLUWER

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

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

Diversification Opportunities for GM and WOLTERS KLUWER

-0.61

Correlation Coefficient

GM  WOLTERS KLUWER

Excellent diversification

The 3 months correlation between GM and WOLTERS is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and WOLTERS KLUWER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WOLTERS KLUWER ADR 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 WOLTERS KLUWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WOLTERS KLUWER ADR has no effect on the direction of GM i.e., GM and WOLTERS KLUWER go up and down completely randomly.

Pair Corralation between GM and WOLTERS KLUWER

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.18 times more return on investment than WOLTERS KLUWER. However, GM is 1.18 times more volatile than WOLTERS KLUWER ADR. It trades about 0.04 of its potential returns per unit of risk. WOLTERS KLUWER ADR is currently generating about 0.05 per unit of risk. If you would invest  3,370  in General Motors on December 4, 2024 and sell it today you would earn a total of  1,212  from holding General Motors or generate 35.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.6%
Values	Daily Returns

General Motors  vs.  WOLTERS KLUWER ADR

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

WOLTERS KLUWER ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days WOLTERS KLUWER ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GM and WOLTERS KLUWER

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

The idea behind General Motors and WOLTERS KLUWER ADR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.