Correlation Between GM and Marstons PLC

Can any of the company-specific risk be diversified away by investing in both GM and Marstons 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 Marstons 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 Marstons PLC, you can compare the effects of market volatilities on GM and Marstons 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 Marstons PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Marstons PLC.

Diversification Opportunities for GM and Marstons PLC

0.0

Correlation Coefficient

GM  Marstons PLC

Pay attention - limited upside

The 3 months correlation between GM and Marstons is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Marstons PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marstons 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 Marstons PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marstons PLC has no effect on the direction of GM i.e., GM and Marstons PLC go up and down completely randomly.

Pair Corralation between GM and Marstons PLC

Allowing for the 90-day total investment horizon GM is expected to generate 1.04 times less return on investment than Marstons PLC. But when comparing it to its historical volatility, General Motors is 2.03 times less risky than Marstons PLC. It trades about 0.05 of its potential returns per unit of risk. Marstons PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  399.00  in Marstons PLC on September 3, 2024 and sell it today you would earn a total of  29.00  from holding Marstons PLC or generate 7.27% return on investment over 90 days.

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

General Motors  vs.  Marstons PLC

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.

Marstons PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind General Motors and Marstons 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.