Correlation Between GM and CNFinance Holdings

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

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

Diversification Opportunities for GM and CNFinance Holdings

0.36

Correlation Coefficient

GM  CNFinance Holdings

Weak diversification

The 3 months correlation between GM and CNFinance is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CNFinance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNFinance Holdings 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 CNFinance Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNFinance Holdings has no effect on the direction of GM i.e., GM and CNFinance Holdings go up and down completely randomly.

Pair Corralation between GM and CNFinance Holdings

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.36 times more return on investment than CNFinance Holdings. However, General Motors is 2.77 times less risky than CNFinance Holdings. It trades about 0.12 of its potential returns per unit of risk. CNFinance Holdings is currently generating about 0.03 per unit of risk. If you would invest  4,532  in General Motors on May 6, 2025 and sell it today you would earn a total of  745.00  from holding General Motors or generate 16.44% return on investment over 90 days.

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

General Motors  vs.  CNFinance Holdings

General Motors

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

CNFinance Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNFinance Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, CNFinance Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and CNFinance Holdings

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

The idea behind General Motors and CNFinance Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.