Correlation Between GM and Xilam Animation

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

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

Diversification Opportunities for GM and Xilam Animation

-0.72

Correlation Coefficient

GM  Xilam Animation

Pay attention - limited upside

The 3 months correlation between GM and Xilam is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Xilam Animation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xilam Animation 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 Xilam Animation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xilam Animation has no effect on the direction of GM i.e., GM and Xilam Animation go up and down completely randomly.

Pair Corralation between GM and Xilam Animation

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.83 times more return on investment than Xilam Animation. However, General Motors is 1.21 times less risky than Xilam Animation. It trades about 0.08 of its potential returns per unit of risk. Xilam Animation is currently generating about -0.07 per unit of risk. If you would invest  4,551  in General Motors on August 31, 2024 and sell it today you would earn a total of  1,008  from holding General Motors or generate 22.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.69%
Values	Daily Returns

General Motors  vs.  Xilam Animation

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 weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Xilam Animation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xilam Animation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Xilam Animation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Xilam Animation

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

The idea behind General Motors and Xilam Animation 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.