Correlation Between GM and Thurgauer Kantonalbank

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

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

Diversification Opportunities for GM and Thurgauer Kantonalbank

0.22

Correlation Coefficient

GM  Thurgauer Kantonalbank

Modest diversification

The 3 months correlation between GM and Thurgauer is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Thurgauer Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thurgauer Kantonalbank 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 Thurgauer Kantonalbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thurgauer Kantonalbank has no effect on the direction of GM i.e., GM and Thurgauer Kantonalbank go up and down completely randomly.

Pair Corralation between GM and Thurgauer Kantonalbank

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.17 times more return on investment than Thurgauer Kantonalbank. However, GM is 2.17 times more volatile than Thurgauer Kantonalbank. It trades about 0.09 of its potential returns per unit of risk. Thurgauer Kantonalbank is currently generating about 0.04 per unit of risk. If you would invest  3,568  in General Motors on September 25, 2024 and sell it today you would earn a total of  1,778  from holding General Motors or generate 49.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

General Motors  vs.  Thurgauer Kantonalbank

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 weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Thurgauer Kantonalbank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thurgauer Kantonalbank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Thurgauer Kantonalbank is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GM and Thurgauer Kantonalbank

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

The idea behind General Motors and Thurgauer Kantonalbank 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.