Correlation Between GM and Amcor Plc
Can any of the company-specific risk be diversified away by investing in both GM and Amcor Plc 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 Amcor Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Amcor plc, you can compare the effects of market volatilities on GM and Amcor Plc 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 Amcor Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Amcor Plc.
Diversification Opportunities for GM and Amcor Plc
Average diversification
The 3 months correlation between GM and Amcor is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Amcor plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcor plc 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 Amcor Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcor plc has no effect on the direction of GM i.e., GM and Amcor Plc go up and down completely randomly.
Pair Corralation between GM and Amcor Plc
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Amcor Plc. In addition to that, GM is 2.49 times more volatile than Amcor plc. It trades about -0.09 of its total potential returns per unit of risk. Amcor plc is currently generating about 0.29 per unit of volatility. If you would invest 961.00 in Amcor plc on November 29, 2024 and sell it today you would earn a total of 39.00 from holding Amcor plc or generate 4.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Amcor plc
Performance |
| Timeline |
| General Motors |
| Amcor plc |
GM and Amcor Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Amcor Plc
The main advantage of trading using opposite GM and Amcor Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Amcor Plc 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 Amcor Plc will offset losses from the drop in Amcor Plc's long position.The idea behind General Motors and Amcor 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.| Amcor Plc vs. Ball Corporation | Amcor Plc vs. Sealed Air | Amcor Plc vs. International Paper | Amcor Plc vs. Avery Dennison Corp |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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