Correlation Between GM and Adani Total
Can any of the company-specific risk be diversified away by investing in both GM and Adani Total 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 Adani Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Adani Total Gas, you can compare the effects of market volatilities on GM and Adani Total 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 Adani Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Adani Total.
Diversification Opportunities for GM and Adani Total
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Adani is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Adani Total Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adani Total Gas 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 Adani Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adani Total Gas has no effect on the direction of GM i.e., GM and Adani Total go up and down completely randomly.
Pair Corralation between GM and Adani Total
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.57 times more return on investment than Adani Total. However, General Motors is 1.75 times less risky than Adani Total. It trades about 0.04 of its potential returns per unit of risk. Adani Total Gas is currently generating about -0.05 per unit of risk. If you would invest 3,850 in General Motors on October 22, 2024 and sell it today you would earn a total of 1,247 from holding General Motors or generate 32.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.99% |
| Values | Daily Returns |
General Motors vs. Adani Total Gas
Performance |
| Timeline |
| General Motors |
| Adani Total Gas |
GM and Adani Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Adani Total
The main advantage of trading using opposite GM and Adani Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Adani Total 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 Adani Total will offset losses from the drop in Adani Total's long position.The idea behind General Motors and Adani Total Gas 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.| Adani Total vs. Varun Beverages Limited | Adani Total vs. Heritage Foods Limited | Adani Total vs. Patanjali Foods Limited | Adani Total vs. Sarveshwar Foods Limited |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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