Correlation Between GM and Taiji Computer

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

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

Diversification Opportunities for GM and Taiji Computer

0.8

Correlation Coefficient

GM  Taiji Computer

Very poor diversification

The 3 months correlation between GM and Taiji is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Taiji Computer Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiji Computer Corp 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 Taiji Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiji Computer Corp has no effect on the direction of GM i.e., GM and Taiji Computer go up and down completely randomly.

Pair Corralation between GM and Taiji Computer

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Taiji Computer. In addition to that, GM is 1.14 times more volatile than Taiji Computer Corp. It trades about -0.31 of its total potential returns per unit of risk. Taiji Computer Corp is currently generating about -0.09 per unit of volatility. If you would invest  2,648  in Taiji Computer Corp on September 24, 2024 and sell it today you would lose (112.00) from holding Taiji Computer Corp or give up 4.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

General Motors  vs.  Taiji Computer Corp

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Taiji Computer Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiji Computer Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Taiji Computer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Taiji Computer

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

The idea behind General Motors and Taiji Computer Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..