Correlation Between GM and Trimble

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

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

Diversification Opportunities for GM and Trimble

0.9

Correlation Coefficient

GM  Trimble

Almost no diversification

The 3 months correlation between GM and Trimble is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Trimble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trimble 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 Trimble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trimble has no effect on the direction of GM i.e., GM and Trimble go up and down completely randomly.

Pair Corralation between GM and Trimble

Allowing for the 90-day total investment horizon GM is expected to generate 1.66 times less return on investment than Trimble. In addition to that, GM is 1.89 times more volatile than Trimble. It trades about 0.12 of its total potential returns per unit of risk. Trimble is currently generating about 0.36 per unit of volatility. If you would invest  6,332  in Trimble on May 6, 2025 and sell it today you would earn a total of  1,932  from holding Trimble or generate 30.51% return on investment over 90 days.

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

General Motors  vs.  Trimble

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.

Trimble

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Trimble sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Trimble

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

The idea behind General Motors and Trimble 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.