Correlation Between GM and Bank Polska

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

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

Diversification Opportunities for GM and Bank Polska

-0.29

Correlation Coefficient

GM  Bank Polska

Very good diversification

The 3 months correlation between GM and Bank is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bank Polska Kasa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Polska Kasa 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 Bank Polska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Polska Kasa has no effect on the direction of GM i.e., GM and Bank Polska go up and down completely randomly.

Pair Corralation between GM and Bank Polska

Allowing for the 90-day total investment horizon GM is expected to generate 1.17 times less return on investment than Bank Polska. In addition to that, GM is 1.03 times more volatile than Bank Polska Kasa. It trades about 0.05 of its total potential returns per unit of risk. Bank Polska Kasa is currently generating about 0.07 per unit of volatility. If you would invest  8,076  in Bank Polska Kasa on September 26, 2024 and sell it today you would earn a total of  5,889  from holding Bank Polska Kasa or generate 72.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

General Motors  vs.  Bank Polska Kasa

General Motors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 9 (%) 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.

Bank Polska Kasa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Polska Kasa has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with GM and Bank Polska

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

The idea behind General Motors and Bank Polska Kasa 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 Global Correlations module to find global opportunities by holding instruments from different markets.