Correlation Between GM and Brandes International
Can any of the company-specific risk be diversified away by investing in both GM and Brandes International 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 Brandes International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Brandes International Equity, you can compare the effects of market volatilities on GM and Brandes International 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 Brandes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Brandes International.
Diversification Opportunities for GM and Brandes International
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Brandes is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Brandes International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandes International 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 Brandes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandes International has no effect on the direction of GM i.e., GM and Brandes International go up and down completely randomly.
Pair Corralation between GM and Brandes International
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.79 times more return on investment than Brandes International. However, GM is 2.79 times more volatile than Brandes International Equity. It trades about 0.07 of its potential returns per unit of risk. Brandes International Equity is currently generating about 0.08 per unit of risk. If you would invest 3,617 in General Motors on September 2, 2024 and sell it today you would earn a total of 1,942 from holding General Motors or generate 53.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Brandes International Equity
Performance |
| Timeline |
| General Motors |
| Brandes International |
GM and Brandes International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Brandes International
The main advantage of trading using opposite GM and Brandes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Brandes International 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 Brandes International will offset losses from the drop in Brandes International's long position.The idea behind General Motors and Brandes International Equity 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.| Brandes International vs. Brandes Small Cap | Brandes International vs. Brandes Small Cap | Brandes International vs. Brandes Small Cap | Brandes International vs. Brandes E Plus |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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