Correlation Between GM and Grandeur Peak

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

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

Diversification Opportunities for GM and Grandeur Peak

-0.41

Correlation Coefficient

GM  Grandeur Peak

Very good diversification

The 3 months correlation between GM and Grandeur is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Grandeur Peak Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grandeur Peak Global 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 Grandeur Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grandeur Peak Global has no effect on the direction of GM i.e., GM and Grandeur Peak go up and down completely randomly.

Pair Corralation between GM and Grandeur Peak

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Grandeur Peak. In addition to that, GM is 5.65 times more volatile than Grandeur Peak Global. It trades about -0.16 of its total potential returns per unit of risk. Grandeur Peak Global is currently generating about 0.17 per unit of volatility. If you would invest  1,640  in Grandeur Peak Global on September 14, 2024 and sell it today you would earn a total of  27.00  from holding Grandeur Peak Global or generate 1.65% return on investment over 90 days.

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

General Motors  vs.  Grandeur Peak Global

General Motors

Risk-Adjusted Performance

6 of 100

OK

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.

Grandeur Peak Global

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grandeur Peak Global are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Grandeur Peak 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 Grandeur Peak

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

The idea behind General Motors and Grandeur Peak Global 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.