Correlation Between GM and Perkins Mid

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

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

Diversification Opportunities for GM and Perkins Mid

0.43

Correlation Coefficient

GM  Perkins Mid

Very weak diversification

The 3 months correlation between GM and Perkins is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Perkins Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perkins Mid Cap 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 Perkins Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perkins Mid Cap has no effect on the direction of GM i.e., GM and Perkins Mid go up and down completely randomly.

Pair Corralation between GM and Perkins Mid

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.98 times more return on investment than Perkins Mid. However, GM is 1.98 times more volatile than Perkins Mid Cap. It trades about 0.05 of its potential returns per unit of risk. Perkins Mid Cap is currently generating about 0.01 per unit of risk. If you would invest  3,294  in General Motors on September 20, 2024 and sell it today you would earn a total of  1,740  from holding General Motors or generate 52.82% return on investment over 90 days.

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

General Motors  vs.  Perkins Mid Cap

General Motors

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Perkins Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perkins Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with GM and Perkins Mid

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

The idea behind General Motors and Perkins Mid Cap 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.