Correlation Between GM and Teuton Resources

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

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

Diversification Opportunities for GM and Teuton Resources

-0.6

Correlation Coefficient

GM  Teuton Resources

Excellent diversification

The 3 months correlation between GM and Teuton is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Teuton Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teuton Resources Corp 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 Teuton Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teuton Resources Corp has no effect on the direction of GM i.e., GM and Teuton Resources go up and down completely randomly.

Pair Corralation between GM and Teuton Resources

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.81 times more return on investment than Teuton Resources. However, General Motors is 1.24 times less risky than Teuton Resources. It trades about 0.1 of its potential returns per unit of risk. Teuton Resources Corp is currently generating about -0.12 per unit of risk. If you would invest  4,620  in General Motors on September 13, 2024 and sell it today you would earn a total of  654.00  from holding General Motors or generate 14.16% 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.  Teuton Resources Corp

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.

Teuton Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teuton Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with GM and Teuton Resources

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

The idea behind General Motors and Teuton Resources Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.