Correlation Between GM and Fundo Investec

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

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

Diversification Opportunities for GM and Fundo Investec

0.38

Correlation Coefficient

GM  Fundo Investec

Weak diversification

The 3 months correlation between GM and Fundo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fundo Investec IMB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundo Investec IMB 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 Fundo Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundo Investec IMB has no effect on the direction of GM i.e., GM and Fundo Investec go up and down completely randomly.

Pair Corralation between GM and Fundo Investec

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.72 times more return on investment than Fundo Investec. However, General Motors is 1.39 times less risky than Fundo Investec. It trades about 0.04 of its potential returns per unit of risk. Fundo Investec IMB is currently generating about -0.01 per unit of risk. If you would invest  3,568  in General Motors on October 13, 2024 and sell it today you would earn a total of  1,417  from holding General Motors or generate 39.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

General Motors  vs.  Fundo Investec IMB

General Motors

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Fundo Investec IMB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundo Investec IMB has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with GM and Fundo Investec

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

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