Correlation Between GM and Oppenhmr Discovery

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

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

Diversification Opportunities for GM and Oppenhmr Discovery

0.72

Correlation Coefficient

GM  Oppenhmr Discovery

Poor diversification

The 3 months correlation between GM and Oppenhmr is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Oppenhmr Discovery Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oppenhmr Discovery Mid 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 Oppenhmr Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oppenhmr Discovery Mid has no effect on the direction of GM i.e., GM and Oppenhmr Discovery go up and down completely randomly.

Pair Corralation between GM and Oppenhmr Discovery

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.85 times more return on investment than Oppenhmr Discovery. However, General Motors is 1.17 times less risky than Oppenhmr Discovery. It trades about -0.04 of its potential returns per unit of risk. Oppenhmr Discovery Mid is currently generating about -0.29 per unit of risk. If you would invest  5,492  in General Motors on October 1, 2024 and sell it today you would lose (64.00) from holding General Motors or give up 1.17% of portfolio value over 90 days.

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

General Motors  vs.  Oppenhmr Discovery Mid

General Motors

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 11 (%) 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.

Oppenhmr Discovery Mid

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oppenhmr Discovery Mid are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Oppenhmr Discovery 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 Oppenhmr Discovery

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

The idea behind General Motors and Oppenhmr Discovery Mid 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.