Correlation Between GM and AB High
Can any of the company-specific risk be diversified away by investing in both GM and AB High 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 AB High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and AB High Dividend, you can compare the effects of market volatilities on GM and AB High 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 AB High. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and AB High.
Diversification Opportunities for GM and AB High
Poor diversification
The 3 months correlation between GM and HIDV is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AB High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB High Dividend 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 AB High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB High Dividend has no effect on the direction of GM i.e., GM and AB High go up and down completely randomly.
Pair Corralation between GM and AB High
Allowing for the 90-day total investment horizon GM is expected to generate 1.0 times less return on investment than AB High. In addition to that, GM is 2.63 times more volatile than AB High Dividend. It trades about 0.05 of its total potential returns per unit of risk. AB High Dividend is currently generating about 0.12 per unit of volatility. If you would invest 4,972 in AB High Dividend on September 3, 2024 and sell it today you would earn a total of 2,522 from holding AB High Dividend or generate 50.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 86.67% |
| Values | Daily Returns |
General Motors vs. AB High Dividend
Performance |
| Timeline |
| General Motors |
| AB High Dividend |
GM and AB High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and AB High
The main advantage of trading using opposite GM and AB High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, AB High 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 AB High will offset losses from the drop in AB High's long position.The idea behind General Motors and AB High Dividend 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.| AB High vs. AB Low Volatility | AB High vs. AB Disruptors ETF | AB High vs. AB Ultra Short | AB High vs. Ab Tax Aware Short |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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