Correlation Between GM and AAC Technologies
Can any of the company-specific risk be diversified away by investing in both GM and AAC Technologies 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 AAC Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and AAC Technologies Holdings, you can compare the effects of market volatilities on GM and AAC Technologies 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 AAC Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and AAC Technologies.
Diversification Opportunities for GM and AAC Technologies
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and AAC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AAC Technologies Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAC Technologies Holdings 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 AAC Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAC Technologies Holdings has no effect on the direction of GM i.e., GM and AAC Technologies go up and down completely randomly.
Pair Corralation between GM and AAC Technologies
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.76 times more return on investment than AAC Technologies. However, General Motors is 1.31 times less risky than AAC Technologies. It trades about 0.13 of its potential returns per unit of risk. AAC Technologies Holdings is currently generating about 0.08 per unit of risk. If you would invest 5,154 in General Motors on August 30, 2024 and sell it today you would earn a total of 396.00 from holding General Motors or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. AAC Technologies Holdings
Performance |
| Timeline |
| General Motors |
| AAC Technologies Holdings |
GM and AAC Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and AAC Technologies
The main advantage of trading using opposite GM and AAC Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, AAC Technologies 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 AAC Technologies will offset losses from the drop in AAC Technologies' long position.The idea behind General Motors and AAC Technologies Holdings 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.| AAC Technologies vs. AmpliTech Group | AAC Technologies vs. AAP Inc | AAC Technologies vs. Airgain | AAC Technologies vs. Amplitech Group |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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