Correlation Between GM and Aggressive Investors
Can any of the company-specific risk be diversified away by investing in both GM and Aggressive Investors 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 Aggressive Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Aggressive Investors 1, you can compare the effects of market volatilities on GM and Aggressive Investors 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 Aggressive Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Aggressive Investors.
Diversification Opportunities for GM and Aggressive Investors
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Aggressive is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aggressive Investors 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Investors 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 Aggressive Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Investors has no effect on the direction of GM i.e., GM and Aggressive Investors go up and down completely randomly.
Pair Corralation between GM and Aggressive Investors
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Aggressive Investors. In addition to that, GM is 2.13 times more volatile than Aggressive Investors 1. It trades about -0.34 of its total potential returns per unit of risk. Aggressive Investors 1 is currently generating about -0.02 per unit of volatility. If you would invest 9,985 in Aggressive Investors 1 on November 27, 2024 and sell it today you would lose (49.00) from holding Aggressive Investors 1 or give up 0.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Aggressive Investors 1
Performance |
| Timeline |
| General Motors |
| Aggressive Investors |
GM and Aggressive Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Aggressive Investors
The main advantage of trading using opposite GM and Aggressive Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Aggressive Investors 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 Aggressive Investors will offset losses from the drop in Aggressive Investors' long position.The idea behind General Motors and Aggressive Investors 1 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.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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