Correlation Between GM and WP Carey

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

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

Diversification Opportunities for GM and WP Carey

-0.72

Correlation Coefficient

GM  WP Carey

Pay attention - limited upside

The 3 months correlation between GM and WPY is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and WP Carey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WP Carey 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 WP Carey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WP Carey has no effect on the direction of GM i.e., GM and WP Carey go up and down completely randomly.

Pair Corralation between GM and WP Carey

Allowing for the 90-day total investment horizon GM is expected to generate 74.63 times less return on investment than WP Carey. In addition to that, GM is 1.83 times more volatile than WP Carey. It trades about 0.0 of its total potential returns per unit of risk. WP Carey is currently generating about 0.1 per unit of volatility. If you would invest  5,255  in WP Carey on December 18, 2024 and sell it today you would earn a total of  427.00  from holding WP Carey or generate 8.13% return on investment over 90 days.

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

General Motors  vs.  WP Carey

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 very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

WP Carey

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WP Carey are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WP Carey may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and WP Carey

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

The idea behind General Motors and WP Carey 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.