Correlation Between GM and Air Transport
Can any of the company-specific risk be diversified away by investing in both GM and Air Transport 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 Air Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Air Transport Services, you can compare the effects of market volatilities on GM and Air Transport 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 Air Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Air Transport.
Diversification Opportunities for GM and Air Transport
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GM and Air is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services 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 Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of GM i.e., GM and Air Transport go up and down completely randomly.
Pair Corralation between GM and Air Transport
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.69 times more return on investment than Air Transport. However, General Motors is 1.45 times less risky than Air Transport. It trades about 0.05 of its potential returns per unit of risk. Air Transport Services is currently generating about 0.0 per unit of risk. If you would invest 3,726 in General Motors on August 28, 2024 and sell it today you would earn a total of 1,753 from holding General Motors or generate 47.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.22% |
| Values | Daily Returns |
General Motors vs. Air Transport Services
Performance |
| Timeline |
| General Motors |
| Air Transport Services |
GM and Air Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Air Transport
The main advantage of trading using opposite GM and Air Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Air Transport 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 Air Transport will offset losses from the drop in Air Transport's long position.The idea behind General Motors and Air Transport Services 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.| Air Transport vs. GEAR4MUSIC LS 10 | Air Transport vs. Harmony Gold Mining | Air Transport vs. REVO INSURANCE SPA | Air Transport vs. Webster Financial |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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