Correlation Between Tata Motors and GM
Can any of the company-specific risk be diversified away by investing in both Tata Motors and GM 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 Tata Motors and GM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tata Motors Limited and General Motors, you can compare the effects of market volatilities on Tata Motors and GM 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 Tata Motors with a short position of GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Motors and GM.
Diversification Opportunities for Tata Motors and GM
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tata and GM is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tata Motors Limited and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Tata Motors 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 Tata Motors Limited are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Tata Motors i.e., Tata Motors and GM go up and down completely randomly.
Pair Corralation between Tata Motors and GM
If you would invest 4,400 in General Motors on January 26, 2024 and sell it today you would earn a total of 108.00 from holding General Motors or generate 2.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Tata Motors Limited vs. General Motors
Performance |
| Timeline |
| Tata Motors Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| General Motors |
Tata Motors and GM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tata Motors and GM
The main advantage of trading using opposite Tata Motors and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Motors position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.| Tata Motors vs. Reservoir Media | Tata Motors vs. BRC Inc | Tata Motors vs. Kandi Technologies Group | Tata Motors vs. NETGEAR |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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