Correlation Between GM and Awardit AB

Can any of the company-specific risk be diversified away by investing in both GM and Awardit AB 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 Awardit AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Awardit AB, you can compare the effects of market volatilities on GM and Awardit AB 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 Awardit AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Awardit AB.

Diversification Opportunities for GM and Awardit AB

0.5

Correlation Coefficient

GM  Awardit AB

Very weak diversification

The 3 months correlation between GM and Awardit is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Awardit AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awardit AB 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 Awardit AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awardit AB has no effect on the direction of GM i.e., GM and Awardit AB go up and down completely randomly.

Pair Corralation between GM and Awardit AB

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.58 times more return on investment than Awardit AB. However, General Motors is 1.71 times less risky than Awardit AB. It trades about 0.05 of its potential returns per unit of risk. Awardit AB is currently generating about 0.01 per unit of risk. If you would invest  3,864  in General Motors on September 12, 2024 and sell it today you would earn a total of  1,410  from holding General Motors or generate 36.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.58%
Values	Daily Returns

General Motors  vs.  Awardit AB

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Awardit AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Awardit AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Awardit AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Awardit AB

The main advantage of trading using opposite GM and Awardit AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Awardit AB 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 Awardit AB will offset losses from the drop in Awardit AB's long position.

The idea behind General Motors and Awardit AB 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.