Correlation Between GM and Autopistas Del
Can any of the company-specific risk be diversified away by investing in both GM and Autopistas Del 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 Autopistas Del into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Autopistas del Sol, you can compare the effects of market volatilities on GM and Autopistas Del 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 Autopistas Del. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Autopistas Del.
Diversification Opportunities for GM and Autopistas Del
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Autopistas is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Autopistas del Sol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autopistas del Sol 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 Autopistas Del. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autopistas del Sol has no effect on the direction of GM i.e., GM and Autopistas Del go up and down completely randomly.
Pair Corralation between GM and Autopistas Del
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Autopistas Del. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.0 times less risky than Autopistas Del. The stock trades about -0.12 of its potential returns per unit of risk. The Autopistas del Sol is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 343,500 in Autopistas del Sol on September 20, 2024 and sell it today you would earn a total of 19,000 from holding Autopistas del Sol or generate 5.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Autopistas del Sol
Performance |
| Timeline |
| General Motors |
| Autopistas del Sol |
GM and Autopistas Del Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Autopistas Del
The main advantage of trading using opposite GM and Autopistas Del positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Autopistas Del 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 Autopistas Del will offset losses from the drop in Autopistas Del's long position.The idea behind General Motors and Autopistas del Sol 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.| Autopistas Del vs. Transportadora de Gas | Autopistas Del vs. Compania de Transporte | Autopistas Del vs. Harmony Gold Mining |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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