Correlation Between GM and Emilia Devel

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

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

Diversification Opportunities for GM and Emilia Devel

0.48

Correlation Coefficient

GM  Emilia Devel

Very weak diversification

The 3 months correlation between GM and Emilia is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Emilia Devel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emilia Devel 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 Emilia Devel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emilia Devel has no effect on the direction of GM i.e., GM and Emilia Devel go up and down completely randomly.

Pair Corralation between GM and Emilia Devel

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Emilia Devel. In addition to that, GM is 1.15 times more volatile than Emilia Devel. It trades about -0.13 of its total potential returns per unit of risk. Emilia Devel is currently generating about 0.27 per unit of volatility. If you would invest  239,200  in Emilia Devel on September 16, 2024 and sell it today you would earn a total of  25,200  from holding Emilia Devel or generate 10.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.95%
Values	Daily Returns

General Motors  vs.  Emilia Devel

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.

Emilia Devel

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emilia Devel are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Emilia Devel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Emilia Devel

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

The idea behind General Motors and Emilia Devel 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.