Correlation Between GM and Australian Oilseeds
Can any of the company-specific risk be diversified away by investing in both GM and Australian Oilseeds 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 Australian Oilseeds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Australian Oilseeds Holdings, you can compare the effects of market volatilities on GM and Australian Oilseeds 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 Australian Oilseeds. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Australian Oilseeds.
Diversification Opportunities for GM and Australian Oilseeds
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Australian is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Australian Oilseeds Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Oilseeds 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 Australian Oilseeds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Oilseeds has no effect on the direction of GM i.e., GM and Australian Oilseeds go up and down completely randomly.
Pair Corralation between GM and Australian Oilseeds
Allowing for the 90-day total investment horizon GM is expected to generate 37.41 times less return on investment than Australian Oilseeds. But when comparing it to its historical volatility, General Motors is 15.72 times less risky than Australian Oilseeds. It trades about 0.05 of its potential returns per unit of risk. Australian Oilseeds Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5.01 in Australian Oilseeds Holdings on September 3, 2024 and sell it today you would lose (3.51) from holding Australian Oilseeds Holdings or give up 70.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 27.88% |
| Values | Daily Returns |
General Motors vs. Australian Oilseeds Holdings
Performance |
| Timeline |
| General Motors |
| Australian Oilseeds |
GM and Australian Oilseeds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Australian Oilseeds
The main advantage of trading using opposite GM and Australian Oilseeds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Australian Oilseeds 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 Australian Oilseeds will offset losses from the drop in Australian Oilseeds' long position.The idea behind General Motors and Australian Oilseeds Holdings 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.| Australian Oilseeds vs. CHS Inc CL | Australian Oilseeds vs. CHS Inc Pref | Australian Oilseeds vs. CHS Inc Pref | Australian Oilseeds vs. CHS Inc CM |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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