Correlation Between GM and AFC Ajax
Can any of the company-specific risk be diversified away by investing in both GM and AFC Ajax 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 AFC Ajax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and AFC Ajax NV, you can compare the effects of market volatilities on GM and AFC Ajax 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 AFC Ajax. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and AFC Ajax.
Diversification Opportunities for GM and AFC Ajax
Very good diversification
The 3 months correlation between GM and AFC is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AFC Ajax NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFC Ajax NV 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 AFC Ajax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFC Ajax NV has no effect on the direction of GM i.e., GM and AFC Ajax go up and down completely randomly.
Pair Corralation between GM and AFC Ajax
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.73 times more return on investment than AFC Ajax. However, GM is 1.73 times more volatile than AFC Ajax NV. It trades about 0.04 of its potential returns per unit of risk. AFC Ajax NV is currently generating about -0.01 per unit of risk. If you would invest 3,510 in General Motors on November 30, 2024 and sell it today you would earn a total of 1,403 from holding General Motors or generate 39.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.21% |
| Values | Daily Returns |
General Motors vs. AFC Ajax NV
Performance |
| Timeline |
| General Motors |
| AFC Ajax NV |
GM and AFC Ajax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and AFC Ajax
The main advantage of trading using opposite GM and AFC Ajax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, AFC Ajax 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 AFC Ajax will offset losses from the drop in AFC Ajax's long position.The idea behind General Motors and AFC Ajax NV 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.| AFC Ajax vs. Reinet Investments SCA | AFC Ajax vs. AMG Advanced Metallurgical | AFC Ajax vs. Accsys Technologies | AFC Ajax vs. BE Semiconductor Industries |
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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