Correlation Between GM and Ion Beam

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

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

Diversification Opportunities for GM and Ion Beam

-0.27

Correlation Coefficient

GM  Ion Beam

Very good diversification

The 3 months correlation between GM and Ion is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ion Beam Applications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ion Beam Applications 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 Ion Beam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ion Beam Applications has no effect on the direction of GM i.e., GM and Ion Beam go up and down completely randomly.

Pair Corralation between GM and Ion Beam

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Ion Beam. In addition to that, GM is 1.29 times more volatile than Ion Beam Applications. It trades about -0.08 of its total potential returns per unit of risk. Ion Beam Applications is currently generating about -0.03 per unit of volatility. If you would invest  1,380  in Ion Beam Applications on September 21, 2024 and sell it today you would lose (22.00) from holding Ion Beam Applications or give up 1.59% of portfolio value over 90 days.

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

General Motors  vs.  Ion Beam Applications

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.

Ion Beam Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ion Beam Applications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GM and Ion Beam

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

The idea behind General Motors and Ion Beam Applications 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.