Correlation Between GM and EXPNLN

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Can any of the company-specific risk be diversified away by investing in both GM and EXPNLN 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 EXPNLN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and EXPNLN 425 01 FEB 29, you can compare the effects of market volatilities on GM and EXPNLN 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 EXPNLN. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and EXPNLN.

Diversification Opportunities for GM and EXPNLN

0.46
  Correlation Coefficient
 GM

Very weak diversification

The 3 months correlation between GM and EXPNLN is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and EXPNLN 425 01 FEB 29 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXPNLN 425 01 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 EXPNLN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXPNLN 425 01 has no effect on the direction of GM i.e., GM and EXPNLN go up and down completely randomly.

Pair Corralation between GM and EXPNLN

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the EXPNLN. In addition to that, GM is 8.77 times more volatile than EXPNLN 425 01 FEB 29. It trades about -0.09 of its total potential returns per unit of risk. EXPNLN 425 01 FEB 29 is currently generating about 0.22 per unit of volatility. If you would invest  9,767  in EXPNLN 425 01 FEB 29 on November 29, 2024 and sell it today you would earn a total of  46.00  from holding EXPNLN 425 01 FEB 29 or generate 0.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy57.14%
ValuesDaily Returns

General Motors  vs.  EXPNLN 425 01 FEB 29

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
EXPNLN 425 01 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days EXPNLN 425 01 FEB 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EXPNLN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GM and EXPNLN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and EXPNLN

The main advantage of trading using opposite GM and EXPNLN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, EXPNLN 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 EXPNLN will offset losses from the drop in EXPNLN's long position.
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The idea behind General Motors and EXPNLN 425 01 FEB 29 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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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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