Correlation Between GM and Japan Airport
Can any of the company-specific risk be diversified away by investing in both GM and Japan Airport 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 Japan Airport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Japan Airport Terminal, you can compare the effects of market volatilities on GM and Japan Airport 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 Japan Airport. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Japan Airport.
Diversification Opportunities for GM and Japan Airport
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Japan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Japan Airport Terminal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Airport Terminal 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 Japan Airport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Airport Terminal has no effect on the direction of GM i.e., GM and Japan Airport go up and down completely randomly.
Pair Corralation between GM and Japan Airport
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.38 times more return on investment than Japan Airport. However, GM is 3.38 times more volatile than Japan Airport Terminal. It trades about 0.07 of its potential returns per unit of risk. Japan Airport Terminal is currently generating about 0.23 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% 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. Japan Airport Terminal
Performance |
| Timeline |
| General Motors |
| Japan Airport Terminal |
GM and Japan Airport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Japan Airport
The main advantage of trading using opposite GM and Japan Airport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Japan Airport 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 Japan Airport will offset losses from the drop in Japan Airport's long position.The idea behind General Motors and Japan Airport Terminal 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.| Japan Airport vs. Aeroports de Paris | Japan Airport vs. Corporacion America Airports | Japan Airport vs. Grupo Aeroportuario del | Japan Airport vs. Grupo Aeroportuario del |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |