Correlation Between GM and American Leisure
Can any of the company-specific risk be diversified away by investing in both GM and American Leisure 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 American Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and American Leisure Holdings, you can compare the effects of market volatilities on GM and American Leisure 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 American Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and American Leisure.
Diversification Opportunities for GM and American Leisure
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and American is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and American Leisure Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Leisure Holdings 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 American Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Leisure Holdings has no effect on the direction of GM i.e., GM and American Leisure go up and down completely randomly.
Pair Corralation between GM and American Leisure
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the American Leisure. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 15.49 times less risky than American Leisure. The stock trades about -0.08 of its potential returns per unit of risk. The American Leisure Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 0.01 in American Leisure Holdings on November 18, 2024 and sell it today you would earn a total of 0.00 from holding American Leisure Holdings or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. American Leisure Holdings
Performance |
| Timeline |
| General Motors |
| American Leisure Holdings |
GM and American Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and American Leisure
The main advantage of trading using opposite GM and American Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, American Leisure 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 American Leisure will offset losses from the drop in American Leisure's long position.The idea behind General Motors and American Leisure Holdings 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.| American Leisure vs. Newron Sport | American Leisure vs. Gold Ent Group | American Leisure vs. Interups | American Leisure vs. TransAKT |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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