Correlation Between GM and Avenira
Can any of the company-specific risk be diversified away by investing in both GM and Avenira 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 Avenira into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Avenira, you can compare the effects of market volatilities on GM and Avenira 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 Avenira. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Avenira.
Diversification Opportunities for GM and Avenira
Very good diversification
The 3 months correlation between GM and Avenira is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Avenira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avenira 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 Avenira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avenira has no effect on the direction of GM i.e., GM and Avenira go up and down completely randomly.
Pair Corralation between GM and Avenira
Allowing for the 90-day total investment horizon GM is expected to generate 1.86 times less return on investment than Avenira. But when comparing it to its historical volatility, General Motors is 3.98 times less risky than Avenira. It trades about 0.06 of its potential returns per unit of risk. Avenira is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1.80 in Avenira on September 14, 2024 and sell it today you would lose (0.80) from holding Avenira or give up 44.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
General Motors vs. Avenira
Performance |
| Timeline |
| General Motors |
| Avenira |
GM and Avenira Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Avenira
The main advantage of trading using opposite GM and Avenira positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Avenira 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 Avenira will offset losses from the drop in Avenira's long position.The idea behind General Motors and Avenira 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.| Avenira vs. Northern Star Resources | Avenira vs. Evolution Mining | Avenira vs. Bluescope Steel | Avenira vs. Sandfire Resources NL |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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