Correlation Between GM and Brinks

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Can any of the company-specific risk be diversified away by investing in both GM and Brinks 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 Brinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and The Brinks, you can compare the effects of market volatilities on GM and Brinks 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 Brinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Brinks.

Diversification Opportunities for GM and Brinks

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between GM and Brinks is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and The Brinks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks 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 Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks has no effect on the direction of GM i.e., GM and Brinks go up and down completely randomly.

Pair Corralation between GM and Brinks

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.29 times more return on investment than Brinks. However, GM is 1.29 times more volatile than The Brinks. It trades about -0.05 of its potential returns per unit of risk. The Brinks is currently generating about -0.1 per unit of risk. If you would invest  5,224  in General Motors on October 17, 2024 and sell it today you would lose (130.00) from holding General Motors or give up 2.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy90.0%
ValuesDaily Returns

General Motors  vs.  The Brinks

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
Brinks 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Brinks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GM and Brinks Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Brinks

The main advantage of trading using opposite GM and Brinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Brinks 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 Brinks will offset losses from the drop in Brinks' long position.
The idea behind General Motors and The Brinks 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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