Correlation Between GM and Addcn Technology

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

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

Diversification Opportunities for GM and Addcn Technology

-0.5

Correlation Coefficient

GM  Addcn Technology

Very good diversification

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

Pair Corralation between GM and Addcn Technology

Allowing for the 90-day total investment horizon General Motors is expected to generate 4.72 times more return on investment than Addcn Technology. However, GM is 4.72 times more volatile than Addcn Technology Co. It trades about 0.13 of its potential returns per unit of risk. Addcn Technology Co is currently generating about -0.03 per unit of risk. If you would invest  4,472  in General Motors on October 2, 2024 and sell it today you would earn a total of  894.00  from holding General Motors or generate 19.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Addcn Technology Co

General Motors

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 10 (%) 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.

Addcn Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Addcn Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Addcn Technology 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 Addcn Technology

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

The idea behind General Motors and Addcn Technology Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.