Correlation Between GM and NewFunds Equity

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

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

Diversification Opportunities for GM and NewFunds Equity

0.0

Correlation Coefficient

GM  NewFunds Equity

Pay attention - limited upside

The 3 months correlation between GM and NewFunds is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and NewFunds Equity Momentum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewFunds Equity Momentum 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 NewFunds Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewFunds Equity Momentum has no effect on the direction of GM i.e., GM and NewFunds Equity go up and down completely randomly.

Pair Corralation between GM and NewFunds Equity

If you would invest (100.00) in NewFunds Equity Momentum on September 15, 2024 and sell it today you would earn a total of  100.00  from holding NewFunds Equity Momentum or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

General Motors  vs.  NewFunds Equity Momentum

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 displayed solid returns over the last few months and may actually be approaching a breakup point.

NewFunds Equity Momentum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NewFunds Equity Momentum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, NewFunds Equity is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GM and NewFunds Equity

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

The idea behind General Motors and NewFunds Equity Momentum 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.