Correlation Between Marcopolo and General Motors

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

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

Diversification Opportunities for Marcopolo and General Motors

0.19

Correlation Coefficient

Marcopolo  General Motors

Average diversification

The 3 months correlation between Marcopolo and General is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Marcopolo SA and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Marcopolo 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 Marcopolo SA are associated (or correlated) with General Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Marcopolo i.e., Marcopolo and General Motors go up and down completely randomly.

Pair Corralation between Marcopolo and General Motors

Assuming the 90 days trading horizon Marcopolo SA is expected to generate 1.05 times more return on investment than General Motors. However, Marcopolo is 1.05 times more volatile than General Motors. It trades about -0.06 of its potential returns per unit of risk. General Motors is currently generating about -0.07 per unit of risk. If you would invest  837.00  in Marcopolo SA on December 1, 2024 and sell it today you would lose (102.00) from holding Marcopolo SA or give up 12.19% of portfolio value over 90 days.

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

Marcopolo SA  vs.  General Motors

Marcopolo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marcopolo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Marcopolo and General Motors

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

The idea behind Marcopolo SA and General Motors 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.