Correlation Between GM and BG Foods

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both GM and BG Foods 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 BG Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and BG Foods, you can compare the effects of market volatilities on GM and BG Foods 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 BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and BG Foods.

Diversification Opportunities for GM and BG Foods

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between GM and BGS is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of GM i.e., GM and BG Foods go up and down completely randomly.

Pair Corralation between GM and BG Foods

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.69 times more return on investment than BG Foods. However, General Motors is 1.44 times less risky than BG Foods. It trades about 0.35 of its potential returns per unit of risk. BG Foods is currently generating about 0.05 per unit of risk. If you would invest  4,051  in General Motors on December 30, 2023 and sell it today you would earn a total of  484.00  from holding General Motors or generate 11.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  BG Foods

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 18 (%) 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.
BG Foods 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in BG Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, BG Foods may actually be approaching a critical reversion point that can send shares even higher in April 2024.

GM and BG Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and BG Foods

The main advantage of trading using opposite GM and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, BG Foods 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 BG Foods will offset losses from the drop in BG Foods' long position.
The idea behind General Motors and BG Foods 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

Other Complementary Tools

Content Syndication
Quickly integrate customizable finance content to your own investment portal
Sign In To Macroaxis
Sign in to explore Macroaxis' wealth optimization platform and fintech modules
Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Watchlist Optimization
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
Share Portfolio
Track or share privately all of your investments from the convenience of any device
Earnings Calls
Check upcoming earnings announcements updated hourly across public exchanges
Top Crypto Exchanges
Search and analyze digital assets across top global cryptocurrency exchanges