Correlation Between GM and Alumina Limited
Can any of the company-specific risk be diversified away by investing in both GM and Alumina Limited 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 Alumina Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Alumina Limited PK, you can compare the effects of market volatilities on GM and Alumina Limited 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 Alumina Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Alumina Limited.
Diversification Opportunities for GM and Alumina Limited
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Alumina is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Alumina Limited PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumina Limited PK 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 Alumina Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumina Limited PK has no effect on the direction of GM i.e., GM and Alumina Limited go up and down completely randomly.
Pair Corralation between GM and Alumina Limited
If you would invest 5,273 in General Motors on August 28, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
General Motors vs. Alumina Limited PK
Performance |
| Timeline |
| General Motors |
| Alumina Limited PK |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Alumina Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Alumina Limited
The main advantage of trading using opposite GM and Alumina Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Alumina Limited 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 Alumina Limited will offset losses from the drop in Alumina Limited's long position.The idea behind General Motors and Alumina Limited PK 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.| Alumina Limited vs. Anhui Conch Cement | Alumina Limited vs. Asahi Kaisei Corp | Alumina Limited vs. Covestro ADR |
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 Stocks Directory module to find actively traded stocks across global markets.
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