Correlation Between GM and AlzChem Group

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

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

Diversification Opportunities for GM and AlzChem Group

0.62

Correlation Coefficient

GM  AlzChem Group

Poor diversification

The 3 months correlation between GM and AlzChem is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AlzChem Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlzChem Group AG 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 AlzChem Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlzChem Group AG has no effect on the direction of GM i.e., GM and AlzChem Group go up and down completely randomly.

Pair Corralation between GM and AlzChem Group

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the AlzChem Group. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.47 times less risky than AlzChem Group. The stock trades about -0.11 of its potential returns per unit of risk. The AlzChem Group AG is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,880  in AlzChem Group AG on September 17, 2024 and sell it today you would lose (140.00) from holding AlzChem Group AG or give up 2.38% of portfolio value over 90 days.

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

General Motors  vs.  AlzChem Group AG

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.

AlzChem Group AG

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AlzChem Group AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AlzChem Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and AlzChem Group

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

The idea behind General Motors and AlzChem Group AG 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.