Correlation Between GM and ALPS
Can any of the company-specific risk be diversified away by investing in both GM and ALPS 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 ALPS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and ALPS, you can compare the effects of market volatilities on GM and ALPS 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 ALPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and ALPS.
Diversification Opportunities for GM and ALPS
Pay attention - limited upside
The 3 months correlation between GM and ALPS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS 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 ALPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS has no effect on the direction of GM i.e., GM and ALPS go up and down completely randomly.
Pair Corralation between GM and ALPS
If you would invest 3,126 in General Motors on August 25, 2024 and sell it today you would earn a total of 2,727 from holding General Motors or generate 87.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
General Motors vs. ALPS
Performance |
| Timeline |
| General Motors |
| ALPS |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and ALPS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and ALPS
The main advantage of trading using opposite GM and ALPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, ALPS 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 ALPS will offset losses from the drop in ALPS's long position.The idea behind General Motors and ALPS 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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