Correlation Between GM and Asiana Airlines
Can any of the company-specific risk be diversified away by investing in both GM and Asiana Airlines 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 Asiana Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Asiana Airlines, you can compare the effects of market volatilities on GM and Asiana Airlines 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 Asiana Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Asiana Airlines.
Diversification Opportunities for GM and Asiana Airlines
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Asiana is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Asiana Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiana Airlines 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 Asiana Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiana Airlines has no effect on the direction of GM i.e., GM and Asiana Airlines go up and down completely randomly.
Pair Corralation between GM and Asiana Airlines
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.32 times more return on investment than Asiana Airlines. However, GM is 1.32 times more volatile than Asiana Airlines. It trades about 0.17 of its potential returns per unit of risk. Asiana Airlines is currently generating about 0.14 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Asiana Airlines
Performance |
| Timeline |
| General Motors |
| Asiana Airlines |
GM and Asiana Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Asiana Airlines
The main advantage of trading using opposite GM and Asiana Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Asiana Airlines 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 Asiana Airlines will offset losses from the drop in Asiana Airlines' long position.The idea behind General Motors and Asiana Airlines 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.| Asiana Airlines vs. Barunson Entertainment Arts | Asiana Airlines vs. DC Media Co | Asiana Airlines vs. ChipsMedia | Asiana Airlines vs. SBI Investment KOREA |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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