Correlation Between GM and ACTIN

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

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

Diversification Opportunities for GM and ACTIN

0.0

Correlation Coefficient

GM  ACTIN

Pay attention - limited upside

The 3 months correlation between GM and ACTIN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ACTIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACTIN 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 ACTIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACTIN has no effect on the direction of GM i.e., GM and ACTIN go up and down completely randomly.

Pair Corralation between GM and ACTIN

If you would invest (100.00) in ACTIN on December 29, 2024 and sell it today you would earn a total of  100.00  from holding ACTIN or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

General Motors  vs.  ACTIN

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 abnormal 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.

ACTIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days ACTIN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ACTIN is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GM and ACTIN

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

The idea behind General Motors and ACTIN 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.