Correlation Between GM and ADS TEC
Can any of the company-specific risk be diversified away by investing in both GM and ADS TEC 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 ADS TEC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and ADS TEC ENERGY PLC, you can compare the effects of market volatilities on GM and ADS TEC 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 ADS TEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and ADS TEC.
Diversification Opportunities for GM and ADS TEC
Poor diversification
The 3 months correlation between GM and ADS is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ADS TEC ENERGY PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADS TEC ENERGY 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 ADS TEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADS TEC ENERGY has no effect on the direction of GM i.e., GM and ADS TEC go up and down completely randomly.
Pair Corralation between GM and ADS TEC
Allowing for the 90-day total investment horizon GM is expected to generate 44.48 times less return on investment than ADS TEC. But when comparing it to its historical volatility, General Motors is 57.42 times less risky than ADS TEC. It trades about 0.16 of its potential returns per unit of risk. ADS TEC ENERGY PLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 228.00 in ADS TEC ENERGY PLC on August 28, 2024 and sell it today you would earn a total of 93.00 from holding ADS TEC ENERGY PLC or generate 40.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 93.65% |
| Values | Daily Returns |
General Motors vs. ADS TEC ENERGY PLC
Performance |
| Timeline |
| General Motors |
| ADS TEC ENERGY |
GM and ADS TEC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and ADS TEC
The main advantage of trading using opposite GM and ADS TEC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, ADS TEC 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 ADS TEC will offset losses from the drop in ADS TEC's long position.The idea behind General Motors and ADS TEC ENERGY PLC 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.| ADS TEC vs. FREYR Battery SA | ADS TEC vs. Microvast Holdings | ADS TEC vs. Chardan NexTech Acquisition | ADS TEC vs. Solid Power |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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