Correlation Between GM and XAC Automation

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

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

Diversification Opportunities for GM and XAC Automation

0.11

Correlation Coefficient

GM  XAC Automation

Average diversification

The 3 months correlation between GM and XAC is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and XAC Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAC Automation 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 XAC Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAC Automation has no effect on the direction of GM i.e., GM and XAC Automation go up and down completely randomly.

Pair Corralation between GM and XAC Automation

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the XAC Automation. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.05 times less risky than XAC Automation. The stock trades about -0.08 of its potential returns per unit of risk. The XAC Automation is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,635  in XAC Automation on December 4, 2024 and sell it today you would lose (80.00) from holding XAC Automation or give up 3.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.22%
Values	Daily Returns

General Motors  vs.  XAC Automation

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.

XAC Automation

Risk-Adjusted Performance

Very Weak

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

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

The idea behind General Motors and XAC Automation 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.