Correlation Between GM and Ilika Plc

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

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

Diversification Opportunities for GM and Ilika Plc

-0.81

Correlation Coefficient

GM  Ilika Plc

Pay attention - limited upside

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

Pair Corralation between GM and Ilika Plc

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Ilika Plc. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.66 times less risky than Ilika Plc. The stock trades about -0.23 of its potential returns per unit of risk. The Ilika plc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Ilika plc on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Ilika plc or generate 0.0% return on investment over 90 days.

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

General Motors  vs.  Ilika plc

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.

Ilika plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ilika plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GM and Ilika Plc

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

The idea behind General Motors and Ilika plc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.