Correlation Between GM and Wise Plc

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

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

Diversification Opportunities for GM and Wise Plc

0.31

Correlation Coefficient

GM  Wise Plc

Weak diversification

The 3 months correlation between GM and Wise is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Wise plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wise 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 Wise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wise plc has no effect on the direction of GM i.e., GM and Wise Plc go up and down completely randomly.

Pair Corralation between GM and Wise Plc

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Wise Plc. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.16 times less risky than Wise Plc. The stock trades about -0.12 of its potential returns per unit of risk. The Wise plc is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,179  in Wise plc on October 15, 2024 and sell it today you would earn a total of  187.00  from holding Wise plc or generate 15.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Wise plc

General Motors

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) 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 February 2025.

Wise plc

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wise plc are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Wise Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Wise Plc

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

The idea behind General Motors and Wise 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.