Correlation Between GM and Argo Investments

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Can any of the company-specific risk be diversified away by investing in both GM and Argo Investments 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 Argo Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Argo Investments, you can compare the effects of market volatilities on GM and Argo Investments 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 Argo Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Argo Investments.

Diversification Opportunities for GM and Argo Investments

GMArgoDiversified AwayGMArgoDiversified Away100%
-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between GM and Argo is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Argo Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argo Investments 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 Argo Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argo Investments has no effect on the direction of GM i.e., GM and Argo Investments go up and down completely randomly.

Pair Corralation between GM and Argo Investments

Allowing for the 90-day total investment horizon General Motors is expected to generate 3.6 times more return on investment than Argo Investments. However, GM is 3.6 times more volatile than Argo Investments. It trades about 0.05 of its potential returns per unit of risk. Argo Investments is currently generating about 0.03 per unit of risk. If you would invest  3,840  in General Motors on November 26, 2024 and sell it today you would earn a total of  840.00  from holding General Motors or generate 21.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.89%
ValuesDaily Returns

General Motors  vs.  Argo Investments

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-505
JavaScript chart by amCharts 3.21.15GM ARG
       Timeline  
General Motors 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb464850525456586062
Argo Investments 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Argo Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Argo Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb8.78.88.999.1

GM and Argo Investments Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.07-3.05-2.02-1.0-0.0150.891.792.693.59 0.20.40.60.81.01.2
JavaScript chart by amCharts 3.21.15GM ARG
       Returns  

Pair Trading with GM and Argo Investments

The main advantage of trading using opposite GM and Argo Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Argo Investments 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 Argo Investments will offset losses from the drop in Argo Investments' long position.
The idea behind General Motors and Argo Investments 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.
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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