Correlation Between GM and TPI Polene

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

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

Diversification Opportunities for GM and TPI Polene

-0.85

Correlation Coefficient

GM  TPI Polene

Pay attention - limited upside

The 3 months correlation between GM and TPI is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and TPI Polene Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPI Polene 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 TPI Polene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPI Polene Public has no effect on the direction of GM i.e., GM and TPI Polene go up and down completely randomly.

Pair Corralation between GM and TPI Polene

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.93 times more return on investment than TPI Polene. However, GM is 1.93 times more volatile than TPI Polene Public. It trades about 0.09 of its potential returns per unit of risk. TPI Polene Public is currently generating about -0.14 per unit of risk. If you would invest  4,676  in General Motors on September 15, 2024 and sell it today you would earn a total of  577.00  from holding General Motors or generate 12.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

General Motors  vs.  TPI Polene 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.

TPI Polene Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPI Polene Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with GM and TPI Polene

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

The idea behind General Motors and TPI Polene 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.