Correlation Between GM and Aberdeen Diversified

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

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

Diversification Opportunities for GM and Aberdeen Diversified

-0.29

Correlation Coefficient

GM  Aberdeen Diversified

Very good diversification

The 3 months correlation between GM and Aberdeen is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aberdeen Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Diversified 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 Aberdeen Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Diversified has no effect on the direction of GM i.e., GM and Aberdeen Diversified go up and down completely randomly.

Pair Corralation between GM and Aberdeen Diversified

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.15 times more return on investment than Aberdeen Diversified. However, GM is 1.15 times more volatile than Aberdeen Diversified Income. It trades about 0.1 of its potential returns per unit of risk. Aberdeen Diversified Income is currently generating about 0.01 per unit of risk. If you would invest  4,602  in General Motors on September 12, 2024 and sell it today you would earn a total of  672.00  from holding General Motors or generate 14.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

General Motors  vs.  Aberdeen Diversified Income

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Aberdeen Diversified

Risk-Adjusted Performance

0 of 100

Weak

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

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

The idea behind General Motors and Aberdeen Diversified Income 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.