Correlation Between GM and Aberdeen Standard
Can any of the company-specific risk be diversified away by investing in both GM and Aberdeen Standard 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 Standard 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 Standard Platinum, you can compare the effects of market volatilities on GM and Aberdeen Standard 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 Standard. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Aberdeen Standard.
Diversification Opportunities for GM and Aberdeen Standard
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Aberdeen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aberdeen Standard Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Standard 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 Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Standard has no effect on the direction of GM i.e., GM and Aberdeen Standard go up and down completely randomly.
Pair Corralation between GM and Aberdeen Standard
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Aberdeen Standard. In addition to that, GM is 3.31 times more volatile than Aberdeen Standard Platinum. It trades about -0.17 of its total potential returns per unit of risk. Aberdeen Standard Platinum is currently generating about -0.17 per unit of volatility. If you would invest 180,000 in Aberdeen Standard Platinum on September 12, 2024 and sell it today you would lose (5,210) from holding Aberdeen Standard Platinum or give up 2.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Aberdeen Standard Platinum
Performance |
| Timeline |
| General Motors |
| Aberdeen Standard |
GM and Aberdeen Standard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Aberdeen Standard
The main advantage of trading using opposite GM and Aberdeen Standard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Aberdeen Standard 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 Standard will offset losses from the drop in Aberdeen Standard's long position.The idea behind General Motors and Aberdeen Standard Platinum 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 Standard vs. Vanguard Index Funds | Aberdeen Standard vs. Vanguard Index Funds | Aberdeen Standard vs. Vanguard STAR Funds | Aberdeen Standard vs. SPDR SP 500 |
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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