Correlation Between GM and Mitsui

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

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

Diversification Opportunities for GM and Mitsui

0.31

Correlation Coefficient

GM  Mitsui

Weak diversification

The 3 months correlation between GM and Mitsui is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mitsui Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Company 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 Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Company has no effect on the direction of GM i.e., GM and Mitsui go up and down completely randomly.

Pair Corralation between GM and Mitsui

If you would invest  4,833  in General Motors on September 4, 2024 and sell it today you would earn a total of  671.00  from holding General Motors or generate 13.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

General Motors  vs.  Mitsui Company

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Mitsui Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind General Motors and Mitsui Company 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..