Correlation Between GM and Idemitsu Kosan

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

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

Diversification Opportunities for GM and Idemitsu Kosan

-0.58

Correlation Coefficient

GM  Idemitsu Kosan

Excellent diversification

The 3 months correlation between GM and Idemitsu is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Idemitsu Kosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idemitsu Kosan 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 Idemitsu Kosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idemitsu Kosan has no effect on the direction of GM i.e., GM and Idemitsu Kosan go up and down completely randomly.

Pair Corralation between GM and Idemitsu Kosan

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.75 times more return on investment than Idemitsu Kosan. However, General Motors is 1.33 times less risky than Idemitsu Kosan. It trades about 0.08 of its potential returns per unit of risk. Idemitsu Kosan Co is currently generating about 0.0 per unit of risk. If you would invest  4,741  in General Motors on September 17, 2024 and sell it today you would earn a total of  512.00  from holding General Motors or generate 10.8% 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.  Idemitsu Kosan Co

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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Idemitsu Kosan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Idemitsu Kosan Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Idemitsu Kosan 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 Idemitsu Kosan

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

The idea behind General Motors and Idemitsu Kosan Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.