Correlation Between GM and UGI Corp

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

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

Diversification Opportunities for GM and UGI Corp

-0.57

Correlation Coefficient

GM  UGI Corp

Excellent diversification

The 3 months correlation between GM and UGI is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and UGI Corp Unit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UGI Corp Unit 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 UGI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UGI Corp Unit has no effect on the direction of GM i.e., GM and UGI Corp go up and down completely randomly.

Pair Corralation between GM and UGI Corp

If you would invest  4,655  in General Motors on September 12, 2024 and sell it today you would earn a total of  619.00  from holding General Motors or generate 13.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.8%
Values	Daily Returns

General Motors  vs.  UGI Corp Unit

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

UGI Corp Unit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UGI Corp Unit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, UGI Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GM and UGI Corp

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

The idea behind General Motors and UGI Corp Unit 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.