Correlation Between GM and WesBanco

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

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

Diversification Opportunities for GM and WesBanco

0.79

Correlation Coefficient

GM  WesBanco

Poor diversification

The 3 months correlation between GM and WesBanco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and WesBanco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesBanco 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 WesBanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesBanco has no effect on the direction of GM i.e., GM and WesBanco go up and down completely randomly.

Pair Corralation between GM and WesBanco

Allowing for the 90-day total investment horizon General Motors is expected to generate 7.88 times more return on investment than WesBanco. However, GM is 7.88 times more volatile than WesBanco. It trades about 0.1 of its potential returns per unit of risk. WesBanco is currently generating about 0.19 per unit of risk. If you would invest  4,602  in General Motors on September 12, 2024 and sell it today you would earn a total of  672.00  from holding General Motors or generate 14.6% return on investment over 90 days.

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

General Motors  vs.  WesBanco

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.

WesBanco

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WesBanco are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, WesBanco is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GM and WesBanco

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

The idea behind General Motors and WesBanco 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.