Correlation Between GM and Beyond Meat

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

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

Diversification Opportunities for GM and Beyond Meat

-0.04

Correlation Coefficient

GM  Beyond Meat

Good diversification

The 3 months correlation between GM and Beyond is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Beyond Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beyond Meat 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 Beyond Meat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beyond Meat has no effect on the direction of GM i.e., GM and Beyond Meat go up and down completely randomly.

Pair Corralation between GM and Beyond Meat

Allowing for the 90-day total investment horizon GM is expected to generate 7.46 times less return on investment than Beyond Meat. But when comparing it to its historical volatility, General Motors is 2.82 times less risky than Beyond Meat. It trades about 0.05 of its potential returns per unit of risk. Beyond Meat is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  741.00  in Beyond Meat on February 5, 2024 and sell it today you would earn a total of  82.00  from holding Beyond Meat or generate 11.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Beyond Meat

General Motors

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 15 (%) 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.

Beyond Meat

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beyond Meat are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Beyond Meat exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Beyond Meat

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

The idea behind General Motors and Beyond Meat 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 Transaction History module to view history of all your transactions and understand their impact on performance.