Correlation Between GM and Aerospace
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By analyzing existing cross correlation between General Motors and Aerospace Hi Tech Holding, you can compare the effects of market volatilities on GM and Aerospace 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 Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Aerospace.
Diversification Opportunities for GM and Aerospace
Poor diversification
The 3 months correlation between GM and Aerospace is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aerospace Hi Tech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerospace Hi Tech 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 Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerospace Hi Tech has no effect on the direction of GM i.e., GM and Aerospace go up and down completely randomly.
Pair Corralation between GM and Aerospace
Allowing for the 90-day total investment horizon GM is expected to generate 1.96 times less return on investment than Aerospace. But when comparing it to its historical volatility, General Motors is 1.72 times less risky than Aerospace. It trades about 0.08 of its potential returns per unit of risk. Aerospace Hi Tech Holding is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 838.00 in Aerospace Hi Tech Holding on September 3, 2024 and sell it today you would earn a total of 355.00 from holding Aerospace Hi Tech Holding or generate 42.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.8% |
| Values | Daily Returns |
General Motors vs. Aerospace Hi Tech Holding
Performance |
| Timeline |
| General Motors |
| Aerospace Hi Tech |
GM and Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Aerospace
The main advantage of trading using opposite GM and Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Aerospace 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 Aerospace will offset losses from the drop in Aerospace's long position.The idea behind General Motors and Aerospace Hi Tech Holding 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.| Aerospace vs. PetroChina Co Ltd | Aerospace vs. China Mobile Limited | Aerospace vs. Industrial and Commercial | Aerospace vs. China Life Insurance |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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