Correlation Between Under Armour and GM

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

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

Diversification Opportunities for Under Armour and GM

-0.76

Correlation Coefficient

Under Armour  GM

Pay attention - limited upside

The 3 months correlation between Under and GM is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Under Armour 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 Under Armour C 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 Under Armour i.e., Under Armour and GM go up and down completely randomly.

Pair Corralation between Under Armour and GM

Allowing for the 90-day total investment horizon Under Armour is expected to generate 3.5 times less return on investment than GM. But when comparing it to its historical volatility, Under Armour C is 1.39 times less risky than GM. It trades about 0.01 of its potential returns per unit of risk. General Motors is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,473  in General Motors on February 9, 2024 and sell it today you would earn a total of  32.00  from holding General Motors or generate 0.72% return on investment over 90 days.

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

Under Armour C  vs.  General Motors

Under Armour C

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Under Armour C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Under Armour and GM

The main advantage of trading using opposite Under Armour and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Under Armour 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 Under Armour C 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.