Correlation Between GM and Amplify Online
Can any of the company-specific risk be diversified away by investing in both GM and Amplify Online 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 Amplify Online into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Amplify Online Retail, you can compare the effects of market volatilities on GM and Amplify Online 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 Amplify Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Amplify Online.
Diversification Opportunities for GM and Amplify Online
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Amplify is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Amplify Online Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amplify Online Retail 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 Amplify Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amplify Online Retail has no effect on the direction of GM i.e., GM and Amplify Online go up and down completely randomly.
Pair Corralation between GM and Amplify Online
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.25 times more return on investment than Amplify Online. However, GM is 1.25 times more volatile than Amplify Online Retail. It trades about 0.05 of its potential returns per unit of risk. Amplify Online Retail is currently generating about 0.06 per unit of risk. If you would invest 3,807 in General Motors on August 26, 2024 and sell it today you would earn a total of 2,046 from holding General Motors or generate 53.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Amplify Online Retail
Performance |
| Timeline |
| General Motors |
| Amplify Online Retail |
GM and Amplify Online Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Amplify Online
The main advantage of trading using opposite GM and Amplify Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Amplify Online 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 Amplify Online will offset losses from the drop in Amplify Online's long position.The idea behind General Motors and Amplify Online Retail 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.| Amplify Online vs. VanEck Pharmaceutical ETF | Amplify Online vs. VanEck Biotech ETF | Amplify Online vs. VanEck Oil Services | Amplify Online vs. iShares Consumer Discretionary |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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