Correlation Between GM and IDJ FINANCIAL

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

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

Diversification Opportunities for GM and IDJ FINANCIAL

-0.73

Correlation Coefficient

GM  IDJ FINANCIAL

Pay attention - limited upside

The 3 months correlation between GM and IDJ is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and IDJ FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDJ FINANCIAL 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 IDJ FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDJ FINANCIAL has no effect on the direction of GM i.e., GM and IDJ FINANCIAL go up and down completely randomly.

Pair Corralation between GM and IDJ FINANCIAL

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the IDJ FINANCIAL. In addition to that, GM is 1.32 times more volatile than IDJ FINANCIAL. It trades about -0.15 of its total potential returns per unit of risk. IDJ FINANCIAL is currently generating about 0.09 per unit of volatility. If you would invest  590,000  in IDJ FINANCIAL on September 15, 2024 and sell it today you would earn a total of  20,000  from holding IDJ FINANCIAL or generate 3.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  IDJ FINANCIAL

General Motors

Risk-Adjusted Performance

6 of 100

Modest

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.

IDJ FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDJ FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, IDJ FINANCIAL is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GM and IDJ FINANCIAL

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

The idea behind General Motors and IDJ FINANCIAL 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.