Correlation Between GM and Catholic Values

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

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

Diversification Opportunities for GM and Catholic Values

-0.76

Correlation Coefficient

GM  Catholic Values

Pay attention - limited upside

The 3 months correlation between GM and Catholic is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Catholic Values Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catholic Values Fixed 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 Catholic Values. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catholic Values Fixed has no effect on the direction of GM i.e., GM and Catholic Values go up and down completely randomly.

Pair Corralation between GM and Catholic Values

Allowing for the 90-day total investment horizon General Motors is expected to generate 7.87 times more return on investment than Catholic Values. However, GM is 7.87 times more volatile than Catholic Values Fixed. It trades about 0.03 of its potential returns per unit of risk. Catholic Values Fixed is currently generating about -0.16 per unit of risk. If you would invest  4,851  in General Motors on September 19, 2024 and sell it today you would earn a total of  148.00  from holding General Motors or generate 3.05% return on investment over 90 days.

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

General Motors  vs.  Catholic Values Fixed

General Motors

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Catholic Values Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catholic Values Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Catholic Values is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Catholic Values

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

The idea behind General Motors and Catholic Values Fixed 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.