Correlation Between GM and GURU Organic

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

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

Diversification Opportunities for GM and GURU Organic

0.14

Correlation Coefficient

GM  GURU Organic

Average diversification

The 3 months correlation between GM and GURU is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and GURU Organic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GURU Organic Energy 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 GURU Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GURU Organic Energy has no effect on the direction of GM i.e., GM and GURU Organic go up and down completely randomly.

Pair Corralation between GM and GURU Organic

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.61 times more return on investment than GURU Organic. However, GM is 1.61 times more volatile than GURU Organic Energy. It trades about 0.11 of its potential returns per unit of risk. GURU Organic Energy is currently generating about 0.0 per unit of risk. If you would invest  4,384  in General Motors on February 11, 2024 and sell it today you would earn a total of  137.00  from holding General Motors or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  GURU Organic Energy

General Motors

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 13 (%) 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.

GURU Organic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GURU Organic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GURU Organic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and GURU Organic

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

The idea behind General Motors and GURU Organic Energy 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..