Correlation Between GM and CPL Group

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

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

Diversification Opportunities for GM and CPL Group

-0.78

Correlation Coefficient

GM  CPL Group

Pay attention - limited upside

The 3 months correlation between GM and CPL is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CPL Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPL Group Public 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 CPL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPL Group Public has no effect on the direction of GM i.e., GM and CPL Group go up and down completely randomly.

Pair Corralation between GM and CPL Group

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the CPL Group. In addition to that, GM is 2.36 times more volatile than CPL Group Public. It trades about -0.13 of its total potential returns per unit of risk. CPL Group Public is currently generating about -0.31 per unit of volatility. If you would invest  133.00  in CPL Group Public on September 16, 2024 and sell it today you would lose (9.00) from holding CPL Group Public or give up 6.77% of portfolio value over 90 days.

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

General Motors  vs.  CPL Group Public

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) 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.

CPL Group Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPL Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with GM and CPL Group

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

The idea behind General Motors and CPL Group Public 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.