Correlation Between GM and Anhui Gujing

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

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

Diversification Opportunities for GM and Anhui Gujing

0.72

Correlation Coefficient

GM  Anhui Gujing

Poor diversification

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

Pair Corralation between GM and Anhui Gujing

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.1 times more return on investment than Anhui Gujing. However, GM is 1.1 times more volatile than Anhui Gujing Distillery. It trades about -0.07 of its potential returns per unit of risk. Anhui Gujing Distillery is currently generating about -0.1 per unit of risk. If you would invest  5,492  in General Motors on December 1, 2024 and sell it today you would lose (579.00) from holding General Motors or give up 10.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

General Motors  vs.  Anhui Gujing Distillery

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Anhui Gujing Distillery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Anhui Gujing Distillery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with GM and Anhui Gujing

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

The idea behind General Motors and Anhui Gujing Distillery 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.