Correlation Between GM and Hapag-Lloyd

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

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

Diversification Opportunities for GM and Hapag-Lloyd

0.29

Correlation Coefficient

GM  Hapag-Lloyd

Modest diversification

The 3 months correlation between GM and Hapag-Lloyd is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hapag Lloyd AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hapag Lloyd AG 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 Hapag-Lloyd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hapag Lloyd AG has no effect on the direction of GM i.e., GM and Hapag-Lloyd go up and down completely randomly.

Pair Corralation between GM and Hapag-Lloyd

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.74 times more return on investment than Hapag-Lloyd. However, General Motors is 1.36 times less risky than Hapag-Lloyd. It trades about 0.06 of its potential returns per unit of risk. Hapag Lloyd AG is currently generating about 0.02 per unit of risk. If you would invest  4,793  in General Motors on September 23, 2024 and sell it today you would earn a total of  388.00  from holding General Motors or generate 8.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

General Motors  vs.  Hapag Lloyd AG

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hapag Lloyd AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hapag Lloyd AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hapag-Lloyd is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and Hapag-Lloyd

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

The idea behind General Motors and Hapag Lloyd AG 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.