Correlation Between GM and Brunello Cucinelli

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

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

Diversification Opportunities for GM and Brunello Cucinelli

-0.13

Correlation Coefficient

GM  Brunello Cucinelli

Good diversification

The 3 months correlation between GM and Brunello is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Brunello Cucinelli SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunello Cucinelli SpA 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 Brunello Cucinelli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunello Cucinelli SpA has no effect on the direction of GM i.e., GM and Brunello Cucinelli go up and down completely randomly.

Pair Corralation between GM and Brunello Cucinelli

Allowing for the 90-day total investment horizon GM is expected to generate 2.56 times less return on investment than Brunello Cucinelli. In addition to that, GM is 1.02 times more volatile than Brunello Cucinelli SpA. It trades about 0.06 of its total potential returns per unit of risk. Brunello Cucinelli SpA is currently generating about 0.16 per unit of volatility. If you would invest  8,185  in Brunello Cucinelli SpA on September 23, 2024 and sell it today you would earn a total of  2,145  from holding Brunello Cucinelli SpA or generate 26.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

General Motors  vs.  Brunello Cucinelli SpA

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 unfluctuating primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brunello Cucinelli SpA

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with GM and Brunello Cucinelli

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

The idea behind General Motors and Brunello Cucinelli SpA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.