Correlation Between GM and Nordic Waterproofing

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

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

Diversification Opportunities for GM and Nordic Waterproofing

0.42

Correlation Coefficient

GM  Nordic Waterproofing

Very weak diversification

The 3 months correlation between GM and Nordic is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nordic Waterproofing Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Waterproofing 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 Nordic Waterproofing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Waterproofing has no effect on the direction of GM i.e., GM and Nordic Waterproofing go up and down completely randomly.

Pair Corralation between GM and Nordic Waterproofing

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.2 times more return on investment than Nordic Waterproofing. However, GM is 1.2 times more volatile than Nordic Waterproofing Holding. It trades about 0.09 of its potential returns per unit of risk. Nordic Waterproofing Holding is currently generating about 0.03 per unit of risk. If you would invest  4,829  in General Motors on September 3, 2024 and sell it today you would earn a total of  675.00  from holding General Motors or generate 13.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

General Motors  vs.  Nordic Waterproofing Holding

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.

Nordic Waterproofing

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Waterproofing Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Nordic Waterproofing is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Nordic Waterproofing

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

The idea behind General Motors and Nordic Waterproofing Holding 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.