Correlation Between GM and Able View
Can any of the company-specific risk be diversified away by investing in both GM and Able View 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 Able View into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Able View Global, you can compare the effects of market volatilities on GM and Able View 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 Able View. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Able View.
Diversification Opportunities for GM and Able View
Pay attention - limited upside
The 3 months correlation between GM and Able is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Able View Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Able View Global 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 Able View. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Able View Global has no effect on the direction of GM i.e., GM and Able View go up and down completely randomly.
Pair Corralation between GM and Able View
Allowing for the 90-day total investment horizon GM is expected to generate 17.34 times less return on investment than Able View. But when comparing it to its historical volatility, General Motors is 15.95 times less risky than Able View. It trades about 0.1 of its potential returns per unit of risk. Able View Global is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2.55 in Able View Global on September 2, 2024 and sell it today you would lose (0.67) from holding Able View Global or give up 26.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 37.5% |
| Values | Daily Returns |
General Motors vs. Able View Global
Performance |
| Timeline |
| General Motors |
| Able View Global |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
GM and Able View Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Able View
The main advantage of trading using opposite GM and Able View positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Able View 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 Able View will offset losses from the drop in Able View's long position.The idea behind General Motors and Able View Global 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.| Able View vs. BJs Restaurants | Able View vs. Biglari Holdings | Able View vs. Micron Technology | Able View vs. Advanced Micro Devices |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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