Correlation Between GM and Dreyfus International

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Can any of the company-specific risk be diversified away by investing in both GM and Dreyfus 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 Dreyfus 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 Dreyfus International Bond, you can compare the effects of market volatilities on GM and Dreyfus 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 Dreyfus International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Dreyfus International.

Diversification Opportunities for GM and Dreyfus International

-0.88
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between GM and Dreyfus is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Dreyfus International Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus 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 Dreyfus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus International has no effect on the direction of GM i.e., GM and Dreyfus International go up and down completely randomly.

Pair Corralation between GM and Dreyfus International

Allowing for the 90-day total investment horizon General Motors is expected to generate 4.64 times more return on investment than Dreyfus International. However, GM is 4.64 times more volatile than Dreyfus International Bond. It trades about 0.11 of its potential returns per unit of risk. Dreyfus International Bond is currently generating about 0.06 per unit of risk. If you would invest  3,212  in General Motors on August 25, 2024 and sell it today you would earn a total of  2,641  from holding General Motors or generate 82.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Dreyfus International Bond

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 11 (%) 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.
Dreyfus International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Dreyfus International Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Dreyfus International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GM and Dreyfus International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Dreyfus International

The main advantage of trading using opposite GM and Dreyfus International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Dreyfus 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 Dreyfus International will offset losses from the drop in Dreyfus International's long position.
The idea behind General Motors and Dreyfus International Bond 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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