Correlation Between GM and Ab Concentrated
Can any of the company-specific risk be diversified away by investing in both GM and Ab Concentrated 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 Concentrated 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 Centrated Growth, you can compare the effects of market volatilities on GM and Ab Concentrated 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 Concentrated. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ab Concentrated.
Diversification Opportunities for GM and Ab Concentrated
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and WPSIX is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ab Centrated Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Centrated Growth 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 Concentrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Centrated Growth has no effect on the direction of GM i.e., GM and Ab Concentrated go up and down completely randomly.
Pair Corralation between GM and Ab Concentrated
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.82 times more return on investment than Ab Concentrated. However, GM is 2.82 times more volatile than Ab Centrated Growth. It trades about 0.13 of its potential returns per unit of risk. Ab Centrated Growth is currently generating about 0.11 per unit of risk. If you would invest 5,154 in General Motors on August 30, 2024 and sell it today you would earn a total of 396.00 from holding General Motors or generate 7.68% 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. Ab Centrated Growth
Performance |
| Timeline |
| General Motors |
| Ab Centrated Growth |
GM and Ab Concentrated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Ab Concentrated
The main advantage of trading using opposite GM and Ab Concentrated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Ab Concentrated 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 Concentrated will offset losses from the drop in Ab Concentrated's long position.The idea behind General Motors and Ab Centrated Growth 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.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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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