Correlation Between GM and Hanza AB

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

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

Diversification Opportunities for GM and Hanza AB

0.81

Correlation Coefficient

GM  Hanza AB

Very poor diversification

The 3 months correlation between GM and Hanza is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hanza AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanza AB 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 Hanza AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanza AB has no effect on the direction of GM i.e., GM and Hanza AB go up and down completely randomly.

Pair Corralation between GM and Hanza AB

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Hanza AB. In addition to that, GM is 1.17 times more volatile than Hanza AB. It trades about -0.17 of its total potential returns per unit of risk. Hanza AB is currently generating about -0.16 per unit of volatility. If you would invest  7,475  in Hanza AB on September 12, 2024 and sell it today you would lose (610.00) from holding Hanza AB or give up 8.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

General Motors  vs.  Hanza AB

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.

Hanza AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hanza AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hanza AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Hanza AB

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

The idea behind General Motors and Hanza AB 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.