Correlation Between Barclays PLC and GM

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

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

Diversification Opportunities for Barclays PLC and GM

0.43

Correlation Coefficient

Barclays PLC  GM

Very weak diversification

The 3 months correlation between Barclays and GM is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Barclays PLC 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 Barclays PLC 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 Barclays PLC i.e., Barclays PLC and GM go up and down completely randomly.

Pair Corralation between Barclays PLC and GM

Assuming the 90 days trading horizon Barclays PLC is expected to generate 3.58 times more return on investment than GM. However, Barclays PLC is 3.58 times more volatile than General Motors. It trades about 0.21 of its potential returns per unit of risk. General Motors is currently generating about 0.08 per unit of risk. If you would invest  13,288  in Barclays PLC on February 2, 2024 and sell it today you would earn a total of  3,462  from holding Barclays PLC or generate 26.05% return on investment over 90 days.

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

Barclays PLC  vs.  General Motors

Barclays PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Barclays PLC showed solid returns over the last few months and may actually be approaching a breakup point.

General Motors

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, GM showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barclays PLC and GM

The main advantage of trading using opposite Barclays PLC and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays PLC 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.

The idea behind Barclays PLC and General Motors 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.