Correlation Between GM and Ibervalles SOCIMI

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

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

Diversification Opportunities for GM and Ibervalles SOCIMI

0.59

Correlation Coefficient

GM  Ibervalles SOCIMI

Very weak diversification

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

Pair Corralation between GM and Ibervalles SOCIMI

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.2 times more return on investment than Ibervalles SOCIMI. However, GM is 1.2 times more volatile than Ibervalles SOCIMI SA. It trades about 0.05 of its potential returns per unit of risk. Ibervalles SOCIMI SA is currently generating about 0.03 per unit of risk. If you would invest  3,585  in General Motors on October 7, 2024 and sell it today you would earn a total of  1,592  from holding General Motors or generate 44.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.69%
Values	Daily Returns

General Motors  vs.  Ibervalles SOCIMI SA

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Ibervalles SOCIMI

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ibervalles SOCIMI SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Ibervalles SOCIMI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GM and Ibervalles SOCIMI

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

The idea behind General Motors and Ibervalles SOCIMI SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.