Correlation Between GM and YDUQ3F

Can any of the company-specific risk be diversified away by investing in both GM and YDUQ3F 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 YDUQ3F into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and YDUQ3F, you can compare the effects of market volatilities on GM and YDUQ3F 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 YDUQ3F. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and YDUQ3F.

Diversification Opportunities for GM and YDUQ3F

-0.59

Correlation Coefficient

GM  YDUQ3F

Excellent diversification

The 3 months correlation between GM and YDUQ3F is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and YDUQ3F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YDUQ3F 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 YDUQ3F. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YDUQ3F has no effect on the direction of GM i.e., GM and YDUQ3F go up and down completely randomly.

Pair Corralation between GM and YDUQ3F

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the YDUQ3F. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.53 times less risky than YDUQ3F. The stock trades about -0.01 of its potential returns per unit of risk. The YDUQ3F is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  879.00  in YDUQ3F on December 20, 2024 and sell it today you would earn a total of  311.00  from holding YDUQ3F or generate 35.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

General Motors  vs.  YDUQ3F

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.

YDUQ3F

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in YDUQ3F are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YDUQ3F sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and YDUQ3F

The main advantage of trading using opposite GM and YDUQ3F positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, YDUQ3F 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 YDUQ3F will offset losses from the drop in YDUQ3F's long position.

The idea behind General Motors and YDUQ3F 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..