Correlation Between GM and Siit E

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

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

Diversification Opportunities for GM and Siit E

-0.8

Correlation Coefficient

GM  Siit E

Pay attention - limited upside

The 3 months correlation between GM and Siit is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Siit E Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit E Fixed 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 Siit E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit E Fixed has no effect on the direction of GM i.e., GM and Siit E go up and down completely randomly.

Pair Corralation between GM and Siit E

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Siit E. In addition to that, GM is 8.26 times more volatile than Siit E Fixed. It trades about -0.11 of its total potential returns per unit of risk. Siit E Fixed is currently generating about 0.04 per unit of volatility. If you would invest  876.00  in Siit E Fixed on September 17, 2024 and sell it today you would earn a total of  2.00  from holding Siit E Fixed or generate 0.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

General Motors  vs.  Siit E Fixed

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Siit E Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siit E Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Siit E 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 Siit E

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

The idea behind General Motors and Siit E Fixed 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.