Correlation Between GM and EGPT

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

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

Diversification Opportunities for GM and EGPT

-0.02

Correlation Coefficient

GM  EGPT

Good diversification

The 3 months correlation between GM and EGPT is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and EGPT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EGPT 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 EGPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EGPT has no effect on the direction of GM i.e., GM and EGPT go up and down completely randomly.

Pair Corralation between GM and EGPT

If you would invest  2,148  in EGPT on September 12, 2024 and sell it today you would earn a total of  0.00  from holding EGPT or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	9.09%
Values	Daily Returns

General Motors  vs.  EGPT

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

EGPT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EGPT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EGPT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and EGPT

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

The idea behind General Motors and EGPT 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.