Correlation Between GM and Trivago NV

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

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

Diversification Opportunities for GM and Trivago NV

-0.1

Correlation Coefficient

GM  Trivago NV

Good diversification

The 3 months correlation between GM and Trivago is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Trivago NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trivago NV 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 Trivago NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trivago NV has no effect on the direction of GM i.e., GM and Trivago NV go up and down completely randomly.

Pair Corralation between GM and Trivago NV

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.62 times more return on investment than Trivago NV. However, General Motors is 1.62 times less risky than Trivago NV. It trades about 0.05 of its potential returns per unit of risk. Trivago NV is currently generating about -0.01 per unit of risk. If you would invest  3,583  in General Motors on September 4, 2024 and sell it today you would earn a total of  1,921  from holding General Motors or generate 53.61% return on investment over 90 days.

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

General Motors  vs.  Trivago NV

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.

Trivago NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Trivago NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Trivago NV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Trivago NV

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

The idea behind General Motors and Trivago NV 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.