Correlation Between GM and Sypris Solutions

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

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

Diversification Opportunities for GM and Sypris Solutions

-0.73

Correlation Coefficient

GM  Sypris Solutions

Pay attention - limited upside

The 3 months correlation between GM and Sypris is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sypris Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sypris Solutions 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 Sypris Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sypris Solutions has no effect on the direction of GM i.e., GM and Sypris Solutions go up and down completely randomly.

Pair Corralation between GM and Sypris Solutions

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Sypris Solutions. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.11 times less risky than Sypris Solutions. The stock trades about -0.15 of its potential returns per unit of risk. The Sypris Solutions is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  136.00  in Sypris Solutions on September 12, 2024 and sell it today you would earn a total of  21.00  from holding Sypris Solutions or generate 15.44% return on investment over 90 days.

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

General Motors  vs.  Sypris Solutions

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Sypris Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sypris Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Sypris Solutions is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GM and Sypris Solutions

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

The idea behind General Motors and Sypris Solutions 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.