Correlation Between GM and Accor S
Can any of the company-specific risk be diversified away by investing in both GM and Accor S 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 Accor S into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Accor S A, you can compare the effects of market volatilities on GM and Accor S 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 Accor S. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Accor S.
Diversification Opportunities for GM and Accor S
Very poor diversification
The 3 months correlation between GM and Accor is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Accor S A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accor S A 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 Accor S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accor S A has no effect on the direction of GM i.e., GM and Accor S go up and down completely randomly.
Pair Corralation between GM and Accor S
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.01 times more return on investment than Accor S. However, GM is 2.01 times more volatile than Accor S A. It trades about 0.17 of its potential returns per unit of risk. Accor S A is currently generating about 0.15 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 | Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
General Motors vs. Accor S A
Performance |
| Timeline |
| General Motors |
| Accor S A |
GM and Accor S Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Accor S
The main advantage of trading using opposite GM and Accor S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Accor S 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 Accor S will offset losses from the drop in Accor S's long position.The idea behind General Motors and Accor S A 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.| Accor S vs. Les Hotels Bav | Accor S vs. Groupe Partouche SA | Accor S vs. Centrale dAchat Franaise | Accor S vs. Manitou BF SA |
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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