Correlation Between GM and America Movil
Can any of the company-specific risk be diversified away by investing in both GM and America Movil 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 America Movil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Aerometrex, you can compare the effects of market volatilities on GM and America Movil 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 America Movil. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and America Movil.
Diversification Opportunities for GM and America Movil
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and America is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aerometrex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on America Movil 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 America Movil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of America Movil has no effect on the direction of GM i.e., GM and America Movil go up and down completely randomly.
Pair Corralation between GM and America Movil
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.58 times more return on investment than America Movil. However, General Motors is 1.73 times less risky than America Movil. It trades about 0.09 of its potential returns per unit of risk. Aerometrex is currently generating about -0.09 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 277.00 from holding General Motors or generate 5.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Aerometrex
Performance |
| Timeline |
| General Motors |
| America Movil |
GM and America Movil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and America Movil
The main advantage of trading using opposite GM and America Movil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, America Movil 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 America Movil will offset losses from the drop in America Movil's long position.The idea behind General Motors and Aerometrex 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.| America Movil vs. National Storage REIT | America Movil vs. Australian Unity Office | America Movil vs. Australian United Investment | America Movil vs. Clime Investment Management |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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