Correlation Between GM and Solartron Public

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

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

Diversification Opportunities for GM and Solartron Public

-0.78

Correlation Coefficient

GM  Solartron Public

Pay attention - limited upside

The 3 months correlation between GM and Solartron is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Solartron Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solartron Public 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 Solartron Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solartron Public has no effect on the direction of GM i.e., GM and Solartron Public go up and down completely randomly.

Pair Corralation between GM and Solartron Public

Allowing for the 90-day total investment horizon GM is expected to generate 20.84 times less return on investment than Solartron Public. But when comparing it to its historical volatility, General Motors is 33.14 times less risky than Solartron Public. It trades about 0.09 of its potential returns per unit of risk. Solartron Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Solartron Public on September 17, 2024 and sell it today you would lose (21.00) from holding Solartron Public or give up 30.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.76%
Values	Daily Returns

General Motors  vs.  Solartron Public

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.

Solartron Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solartron Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GM and Solartron Public

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

The idea behind General Motors and Solartron Public 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.