Correlation Between GM and Furukawa Electric

Can any of the company-specific risk be diversified away by investing in both GM and Furukawa Electric 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 Furukawa Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Furukawa Electric Co, you can compare the effects of market volatilities on GM and Furukawa Electric 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 Furukawa Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Furukawa Electric.

Diversification Opportunities for GM and Furukawa Electric

0.93

Correlation Coefficient

GM  Furukawa Electric

Almost no diversification

The 3 months correlation between GM and Furukawa is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Furukawa Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Furukawa Electric 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 Furukawa Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Furukawa Electric has no effect on the direction of GM i.e., GM and Furukawa Electric go up and down completely randomly.

Pair Corralation between GM and Furukawa Electric

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Furukawa Electric. In addition to that, GM is 1.07 times more volatile than Furukawa Electric Co. It trades about -0.03 of its total potential returns per unit of risk. Furukawa Electric Co is currently generating about 0.21 per unit of volatility. If you would invest  1,030  in Furukawa Electric Co on January 20, 2024 and sell it today you would earn a total of  53.00  from holding Furukawa Electric Co or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Furukawa Electric Co

General Motors

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 14 (%) 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.

Furukawa Electric

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Furukawa Electric Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Furukawa Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Furukawa Electric

The main advantage of trading using opposite GM and Furukawa Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Furukawa Electric 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 Furukawa Electric will offset losses from the drop in Furukawa Electric's long position.

The idea behind General Motors and Furukawa Electric Co 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.