Correlation Between GM and International Equities

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

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

Diversification Opportunities for GM and International Equities

0.54

Correlation Coefficient

GM  International Equities

Very weak diversification

The 3 months correlation between GM and International is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and International Equities Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equities 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 International Equities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equities has no effect on the direction of GM i.e., GM and International Equities go up and down completely randomly.

Pair Corralation between GM and International Equities

Allowing for the 90-day total investment horizon General Motors is expected to generate 3.3 times more return on investment than International Equities. However, GM is 3.3 times more volatile than International Equities Index. It trades about 0.12 of its potential returns per unit of risk. International Equities Index is currently generating about 0.08 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  770.50  from holding General Motors or generate 17.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

General Motors  vs.  International Equities Index

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.

International Equities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in International Equities Index are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, International Equities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and International Equities

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

The idea behind General Motors and International Equities Index 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.