Correlation Between GM and Industrial Logistics

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

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

Diversification Opportunities for GM and Industrial Logistics

-0.82

Correlation Coefficient

GM  Industrial Logistics

Pay attention - limited upside

The 3 months correlation between GM and Industrial is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Industrial Logistics Propertie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Logistics 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 Industrial Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Logistics has no effect on the direction of GM i.e., GM and Industrial Logistics go up and down completely randomly.

Pair Corralation between GM and Industrial Logistics

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.25 times more return on investment than Industrial Logistics. However, GM is 1.25 times more volatile than Industrial Logistics Properties. It trades about 0.17 of its potential returns per unit of risk. Industrial Logistics Properties is currently generating about 0.2 per unit of risk. If you would invest  5,076  in General Motors on September 1, 2024 and sell it today you would earn a total of  483.00  from holding General Motors or generate 9.52% return on investment over 90 days.

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

General Motors  vs.  Industrial Logistics Propertie

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Industrial Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrial Logistics Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with GM and Industrial Logistics

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

The idea behind General Motors and Industrial Logistics Properties 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.