Correlation Between GM and Aberdeen China
Can any of the company-specific risk be diversified away by investing in both GM and Aberdeen China 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 Aberdeen China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Aberdeen China Oppty, you can compare the effects of market volatilities on GM and Aberdeen China 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 Aberdeen China. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Aberdeen China.
Diversification Opportunities for GM and Aberdeen China
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Aberdeen is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aberdeen China Oppty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen China Oppty 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 Aberdeen China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen China Oppty has no effect on the direction of GM i.e., GM and Aberdeen China go up and down completely randomly.
Pair Corralation between GM and Aberdeen China
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Aberdeen China. In addition to that, GM is 2.36 times more volatile than Aberdeen China Oppty. It trades about -0.32 of its total potential returns per unit of risk. Aberdeen China Oppty is currently generating about 0.18 per unit of volatility. If you would invest 2,165 in Aberdeen China Oppty on November 28, 2024 and sell it today you would earn a total of 78.00 from holding Aberdeen China Oppty or generate 3.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Aberdeen China Oppty
Performance |
| Timeline |
| General Motors |
| Aberdeen China Oppty |
GM and Aberdeen China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Aberdeen China
The main advantage of trading using opposite GM and Aberdeen China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Aberdeen China 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 Aberdeen China will offset losses from the drop in Aberdeen China's long position.The idea behind General Motors and Aberdeen China Oppty 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.| Aberdeen China vs. Inverse Government Long | Aberdeen China vs. Us Government Securities | Aberdeen China vs. Us Government Securities | Aberdeen China vs. Us Government Securities |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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