Correlation Between GM and TCM Public

Can any of the company-specific risk be diversified away by investing in both GM and TCM 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 TCM 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 TCM Public, you can compare the effects of market volatilities on GM and TCM 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 TCM Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and TCM Public.

Diversification Opportunities for GM and TCM Public

-0.82

Correlation Coefficient

GM  TCM Public

Pay attention - limited upside

The 3 months correlation between GM and TCM is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and TCM Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCM 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 TCM Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCM Public has no effect on the direction of GM i.e., GM and TCM Public go up and down completely randomly.

Pair Corralation between GM and TCM Public

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the TCM Public. In addition to that, GM is 1.69 times more volatile than TCM Public. It trades about -0.13 of its total potential returns per unit of risk. TCM Public is currently generating about -0.08 per unit of volatility. If you would invest  72.00  in TCM Public on September 16, 2024 and sell it today you would lose (2.00) from holding TCM Public or give up 2.78% of portfolio value over 90 days.

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

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

TCM Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TCM 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 forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with GM and TCM Public

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

The idea behind General Motors and TCM 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.