Correlation Between GM and Joann

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

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

Diversification Opportunities for GM and Joann

-0.77

Correlation Coefficient

GM  Joann

Pay attention - limited upside

The 3 months correlation between GM and Joann is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Joann Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joann Inc 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 Joann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joann Inc has no effect on the direction of GM i.e., GM and Joann go up and down completely randomly.

Pair Corralation between GM and Joann

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.15 times more return on investment than Joann. However, General Motors is 6.51 times less risky than Joann. It trades about -0.04 of its potential returns per unit of risk. Joann Inc is currently generating about -0.26 per unit of risk. If you would invest  4,285  in General Motors on January 20, 2024 and sell it today you would lose (48.00) from holding General Motors or give up 1.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Joann Inc

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.

Joann Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joann Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with GM and Joann

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

The idea behind General Motors and Joann Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.