Correlation Between GM and Avalon Advanced
Can any of the company-specific risk be diversified away by investing in both GM and Avalon Advanced 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 Avalon Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Avalon Advanced Materials, you can compare the effects of market volatilities on GM and Avalon Advanced 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 Avalon Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Avalon Advanced.
Diversification Opportunities for GM and Avalon Advanced
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Avalon is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Avalon Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalon Advanced Materials 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 Avalon Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalon Advanced Materials has no effect on the direction of GM i.e., GM and Avalon Advanced go up and down completely randomly.
Pair Corralation between GM and Avalon Advanced
If you would invest 4,503 in General Motors on September 2, 2024 and sell it today you would earn a total of 1,056 from holding General Motors or generate 23.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.79% |
| Values | Daily Returns |
General Motors vs. Avalon Advanced Materials
Performance |
| Timeline |
| General Motors |
| Avalon Advanced Materials |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Avalon Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Avalon Advanced
The main advantage of trading using opposite GM and Avalon Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Avalon Advanced 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 Avalon Advanced will offset losses from the drop in Avalon Advanced's long position.The idea behind General Motors and Avalon Advanced Materials 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.| Avalon Advanced vs. Aurelia Metals Limited | Avalon Advanced vs. Artemis Resources | Avalon Advanced vs. Ascendant Resources | Avalon Advanced vs. Benton Resources |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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