Correlation Between GM and GT Capital

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

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

Diversification Opportunities for GM and GT Capital

-0.76

Correlation Coefficient

GM  GT Capital

Pay attention - limited upside

The 3 months correlation between GM and GTCAP is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings 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 GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of GM i.e., GM and GT Capital go up and down completely randomly.

Pair Corralation between GM and GT Capital

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.38 times more return on investment than GT Capital. However, GM is 1.38 times more volatile than GT Capital Holdings. It trades about 0.1 of its potential returns per unit of risk. GT Capital Holdings is currently generating about -0.05 per unit of risk. If you would invest  4,602  in General Motors on September 12, 2024 and sell it today you would earn a total of  672.00  from holding General Motors or generate 14.6% return on investment over 90 days.

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

General Motors  vs.  GT Capital Holdings

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.

GT Capital Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, GT Capital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GM and GT Capital

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

The idea behind General Motors and GT Capital Holdings 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.