Correlation Between GM and InterMetro Communications

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

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

Diversification Opportunities for GM and InterMetro Communications

0.0

Correlation Coefficient

GM  InterMetro Communications

Pay attention - limited upside

The 1 month correlation between GM and InterMetro is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and InterMetro Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterMetro Communications 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 InterMetro Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterMetro Communications has no effect on the direction of GM i.e., GM and InterMetro Communications go up and down completely randomly.

Pair Corralation between GM and InterMetro Communications

If you would invest  0.20  in InterMetro Communications on January 20, 2024 and sell it today you would earn a total of  0.00  from holding InterMetro Communications or generate 0.0% return on investment over 90 days.

Time Period	1 Month [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  InterMetro Communications

General Motors

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

InterMetro Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InterMetro Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, InterMetro Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GM and InterMetro Communications

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

The idea behind General Motors and InterMetro Communications 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.