Correlation Between GM and Australian High

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

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

Diversification Opportunities for GM and Australian High

-0.6

Correlation Coefficient

GM  Australian High

Excellent diversification

The 3 months correlation between GM and Australian is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Australian High Interest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian High Interest 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 Australian High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian High Interest has no effect on the direction of GM i.e., GM and Australian High go up and down completely randomly.

Pair Corralation between GM and Australian High

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Australian High. In addition to that, GM is 126.35 times more volatile than Australian High Interest. It trades about -0.06 of its total potential returns per unit of risk. Australian High Interest is currently generating about 0.75 per unit of volatility. If you would invest  4,974  in Australian High Interest on December 28, 2024 and sell it today you would earn a total of  51.00  from holding Australian High Interest or generate 1.03% return on investment over 90 days.

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

General Motors  vs.  Australian High Interest

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.

Australian High Interest

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Australian High Interest are ranked lower than 59 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Australian High is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Australian High

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

The idea behind General Motors and Australian High Interest 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.