Correlation Between GM and Affiliated Managers
Can any of the company-specific risk be diversified away by investing in both GM and Affiliated Managers 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 Affiliated Managers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Affiliated Managers Group,, you can compare the effects of market volatilities on GM and Affiliated Managers 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 Affiliated Managers. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Affiliated Managers.
Diversification Opportunities for GM and Affiliated Managers
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Affiliated is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Affiliated Managers Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affiliated Managers 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 Affiliated Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affiliated Managers has no effect on the direction of GM i.e., GM and Affiliated Managers go up and down completely randomly.
Pair Corralation between GM and Affiliated Managers
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.64 times more return on investment than Affiliated Managers. However, GM is 1.64 times more volatile than Affiliated Managers Group,. It trades about 0.05 of its potential returns per unit of risk. Affiliated Managers Group, is currently generating about 0.02 per unit of risk. If you would invest 4,057 in General Motors on August 27, 2024 and sell it today you would earn a total of 1,796 from holding General Motors or generate 44.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Affiliated Managers Group,
Performance |
| Timeline |
| General Motors |
| Affiliated Managers |
GM and Affiliated Managers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Affiliated Managers
The main advantage of trading using opposite GM and Affiliated Managers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Affiliated Managers 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 Affiliated Managers will offset losses from the drop in Affiliated Managers' long position.The idea behind General Motors and Affiliated Managers Group, 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.| Affiliated Managers vs. Affiliated Managers Group | Affiliated Managers vs. Southern Company Series | Affiliated Managers vs. DTE Energy | Affiliated Managers vs. United States Cellular |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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