Correlation Between GM and Ab Tax
Can any of the company-specific risk be diversified away by investing in both GM and Ab Tax 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 Tax 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 Tax Aware Short, you can compare the effects of market volatilities on GM and Ab Tax 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 Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ab Tax.
Diversification Opportunities for GM and Ab Tax
Very good diversification
The 3 months correlation between GM and TAFI is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ab Tax Aware Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Tax Aware 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 Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Tax Aware has no effect on the direction of GM i.e., GM and Ab Tax go up and down completely randomly.
Pair Corralation between GM and Ab Tax
Allowing for the 90-day total investment horizon General Motors is expected to generate 9.25 times more return on investment than Ab Tax. However, GM is 9.25 times more volatile than Ab Tax Aware Short. It trades about 0.26 of its potential returns per unit of risk. Ab Tax Aware Short is currently generating about 0.05 per unit of risk. If you would invest 5,273 in General Motors on August 27, 2024 and sell it today you would earn a total of 580.00 from holding General Motors or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Ab Tax Aware Short
Performance |
| Timeline |
| General Motors |
| Ab Tax Aware |
GM and Ab Tax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Ab Tax
The main advantage of trading using opposite GM and Ab Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Ab Tax 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 Tax will offset losses from the drop in Ab Tax's long position.The idea behind General Motors and Ab Tax Aware Short 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 Tax vs. AB Ultra Short | Ab Tax vs. Angel Oak Ultrashort | Ab Tax vs. Bondbloxx ETF Trust | Ab Tax vs. American Century Diversified |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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