Correlation Between GM and AXA SA
Can any of the company-specific risk be diversified away by investing in both GM and AXA SA 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 AXA SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and AXA SA, you can compare the effects of market volatilities on GM and AXA SA 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 AXA SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and AXA SA.
Diversification Opportunities for GM and AXA SA
Pay attention - limited upside
The 3 months correlation between GM and AXA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA SA 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 AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of GM i.e., GM and AXA SA go up and down completely randomly.
Pair Corralation between GM and AXA SA
Allowing for the 90-day total investment horizon General Motors is expected to generate 4.16 times more return on investment than AXA SA. However, GM is 4.16 times more volatile than AXA SA. It trades about 0.09 of its potential returns per unit of risk. AXA SA is currently generating about 0.06 per unit of risk. If you would invest 3,550 in General Motors on September 14, 2024 and sell it today you would earn a total of 1,710 from holding General Motors or generate 48.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
General Motors vs. AXA SA
Performance |
| Timeline |
| General Motors |
| AXA SA |
GM and AXA SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and AXA SA
The main advantage of trading using opposite GM and AXA SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, AXA SA 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 AXA SA will offset losses from the drop in AXA SA's long position.The idea behind General Motors and AXA SA 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.| AXA SA vs. Taiwan Semiconductor Manufacturing | AXA SA vs. Monster Beverage Corp | AXA SA vs. First Republic Bank | AXA SA vs. Verizon Communications |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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