Correlation Between GM and Aberdeen Japan
Can any of the company-specific risk be diversified away by investing in both GM and Aberdeen Japan 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 Japan 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 Japan Equity, you can compare the effects of market volatilities on GM and Aberdeen Japan 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 Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Aberdeen Japan.
Diversification Opportunities for GM and Aberdeen Japan
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Aberdeen is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aberdeen Japan Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Japan Equity 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 Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Japan Equity has no effect on the direction of GM i.e., GM and Aberdeen Japan go up and down completely randomly.
Pair Corralation between GM and Aberdeen Japan
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.34 times more return on investment than Aberdeen Japan. However, GM is 2.34 times more volatile than Aberdeen Japan Equity. It trades about 0.14 of its potential returns per unit of risk. Aberdeen Japan Equity is currently generating about -0.1 per unit of risk. If you would invest 4,474 in General Motors on September 29, 2024 and sell it today you would earn a total of 954.00 from holding General Motors or generate 21.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
General Motors vs. Aberdeen Japan Equity
Performance |
| Timeline |
| General Motors |
| Aberdeen Japan Equity |
GM and Aberdeen Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Aberdeen Japan
The main advantage of trading using opposite GM and Aberdeen Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Aberdeen Japan 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 Japan will offset losses from the drop in Aberdeen Japan's long position.The idea behind General Motors and Aberdeen Japan Equity 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 Japan vs. Aqr Diversified Arbitrage | Aberdeen Japan vs. Wilmington Diversified Income | Aberdeen Japan vs. Tax Free Conservative Income | Aberdeen Japan vs. Fidelity Advisor 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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