Correlation Between GM and Advanced Technology
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By analyzing existing cross correlation between General Motors and Advanced Technology Materials, you can compare the effects of market volatilities on GM and Advanced Technology 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 Advanced Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Advanced Technology.
Diversification Opportunities for GM and Advanced Technology
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Advanced is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Advanced Technology Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Technology 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 Advanced Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Technology has no effect on the direction of GM i.e., GM and Advanced Technology go up and down completely randomly.
Pair Corralation between GM and Advanced Technology
Allowing for the 90-day total investment horizon GM is expected to generate 3.94 times less return on investment than Advanced Technology. But when comparing it to its historical volatility, General Motors is 1.52 times less risky than Advanced Technology. It trades about 0.07 of its potential returns per unit of risk. Advanced Technology Materials is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,029 in Advanced Technology Materials on August 29, 2024 and sell it today you would earn a total of 185.00 from holding Advanced Technology Materials or generate 17.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Advanced Technology Materials
Performance |
| Timeline |
| General Motors |
| Advanced Technology |
GM and Advanced Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Advanced Technology
The main advantage of trading using opposite GM and Advanced Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Advanced Technology 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 Advanced Technology will offset losses from the drop in Advanced Technology's long position.The idea behind General Motors and Advanced Technology Materials 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.| Advanced Technology vs. Zijin Mining Group | Advanced Technology vs. Wanhua Chemical Group | Advanced Technology vs. Baoshan Iron Steel | Advanced Technology vs. Shandong Gold Mining |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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