Correlation Between GM and Audix Corp

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

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

Diversification Opportunities for GM and Audix Corp

-0.24

Correlation Coefficient

GM  Audix Corp

Very good diversification

The 3 months correlation between GM and Audix is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Audix Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Audix Corp 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 Audix Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Audix Corp has no effect on the direction of GM i.e., GM and Audix Corp go up and down completely randomly.

Pair Corralation between GM and Audix Corp

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Audix Corp. In addition to that, GM is 5.64 times more volatile than Audix Corp. It trades about -0.11 of its total potential returns per unit of risk. Audix Corp is currently generating about -0.1 per unit of volatility. If you would invest  7,060  in Audix Corp on September 17, 2024 and sell it today you would lose (70.00) from holding Audix Corp or give up 0.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

General Motors  vs.  Audix Corp

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Audix Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Audix Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Audix Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GM and Audix Corp

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

The idea behind General Motors and Audix Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.