Correlation Between GM and Grupo Financiero

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

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

Diversification Opportunities for GM and Grupo Financiero

-0.39

Correlation Coefficient

GM  Grupo Financiero

Very good diversification

The 3 months correlation between GM and Grupo is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Grupo Financiero Inbursa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Inbursa 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Inbursa has no effect on the direction of GM i.e., GM and Grupo Financiero go up and down completely randomly.

Pair Corralation between GM and Grupo Financiero

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.28 times more return on investment than Grupo Financiero. However, GM is 1.28 times more volatile than Grupo Financiero Inbursa. It trades about 0.1 of its potential returns per unit of risk. Grupo Financiero Inbursa is currently generating about -0.07 per unit of risk. If you would invest  4,829  in General Motors on September 3, 2024 and sell it today you would earn a total of  730.00  from holding General Motors or generate 15.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

General Motors  vs.  Grupo Financiero Inbursa

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 weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Financiero Inbursa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Financiero Inbursa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GM and Grupo Financiero

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

The idea behind General Motors and Grupo Financiero Inbursa 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.