Correlation Between GM and UBS AG
Can any of the company-specific risk be diversified away by investing in both GM and UBS AG 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 UBS AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and UBS AG London, you can compare the effects of market volatilities on GM and UBS AG 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 UBS AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and UBS AG.
Diversification Opportunities for GM and UBS AG
Poor diversification
The 3 months correlation between GM and UBS is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and UBS AG London in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS AG London 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 UBS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS AG London has no effect on the direction of GM i.e., GM and UBS AG go up and down completely randomly.
Pair Corralation between GM and UBS AG
Allowing for the 90-day total investment horizon GM is expected to generate 1.52 times less return on investment than UBS AG. In addition to that, GM is 3.28 times more volatile than UBS AG London. It trades about 0.12 of its total potential returns per unit of risk. UBS AG London is currently generating about 0.6 per unit of volatility. If you would invest 1,780 in UBS AG London on August 31, 2024 and sell it today you would earn a total of 216.00 from holding UBS AG London or generate 12.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. UBS AG London
Performance |
| Timeline |
| General Motors |
| UBS AG London |
GM and UBS AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and UBS AG
The main advantage of trading using opposite GM and UBS AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, UBS AG 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 UBS AG will offset losses from the drop in UBS AG's long position.The idea behind General Motors and UBS AG London 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.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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