Correlation Between GM and CEMEX

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

By analyzing existing cross correlation between General Motors and CEMEX 9125, you can compare the effects of market volatilities on GM and CEMEX 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 CEMEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and CEMEX.

Diversification Opportunities for GM and CEMEX

-0.31

Correlation Coefficient

GM  CEMEX

Very good diversification

The 3 months correlation between GM and CEMEX is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CEMEX 9125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEMEX 9125 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 CEMEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEMEX 9125 has no effect on the direction of GM i.e., GM and CEMEX go up and down completely randomly.

Pair Corralation between GM and CEMEX

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.98 times more return on investment than CEMEX. However, GM is 1.98 times more volatile than CEMEX 9125. It trades about 0.09 of its potential returns per unit of risk. CEMEX 9125 is currently generating about -0.21 per unit of risk. If you would invest  4,829  in General Motors on September 3, 2024 and sell it today you would earn a total of  675.00  from holding General Motors or generate 13.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

General Motors  vs.  CEMEX 9125

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.

CEMEX 9125

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEMEX 9125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for CEMEX 9125 investors.

Pair Trading with GM and CEMEX

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

The idea behind General Motors and CEMEX 9125 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.