Correlation Between Fiat Chrysler and GM

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

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

Diversification Opportunities for Fiat Chrysler and GM

0.0

Correlation Coefficient

Fiat Chrysler  GM

Pay attention - limited upside

The 3 months correlation between Fiat and GM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fiat Chrysler Automobiles and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Fiat Chrysler 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 Fiat Chrysler Automobiles are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Fiat Chrysler i.e., Fiat Chrysler and GM go up and down completely randomly.

Pair Corralation between Fiat Chrysler and GM

If you would invest  3,309  in General Motors on January 30, 2024 and sell it today you would earn a total of  1,275  from holding General Motors or generate 38.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Fiat Chrysler Automobiles  vs.  General Motors

Fiat Chrysler Automobiles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fiat Chrysler Automobiles has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fiat Chrysler is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

General Motors

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 16 (%) 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.

Pair Trading with Fiat Chrysler and GM

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

The idea behind Fiat Chrysler Automobiles and General Motors 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.