Correlation Between GM and Azzad Ethical

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

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

Diversification Opportunities for GM and Azzad Ethical

0.41

Correlation Coefficient

GM  Azzad Ethical

Very weak diversification

The 3 months correlation between GM and Azzad is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Azzad Ethical Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azzad Ethical 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 Azzad Ethical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azzad Ethical has no effect on the direction of GM i.e., GM and Azzad Ethical go up and down completely randomly.

Pair Corralation between GM and Azzad Ethical

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.73 times more return on investment than Azzad Ethical. However, GM is 1.73 times more volatile than Azzad Ethical Fund. It trades about 0.04 of its potential returns per unit of risk. Azzad Ethical Fund is currently generating about 0.03 per unit of risk. If you would invest  3,850  in General Motors on October 22, 2024 and sell it today you would earn a total of  1,247  from holding General Motors or generate 32.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

General Motors  vs.  Azzad Ethical Fund

General Motors

Risk-Adjusted Performance

0 of 100

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 very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Azzad Ethical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Azzad Ethical Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Azzad Ethical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Azzad Ethical

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

The idea behind General Motors and Azzad Ethical Fund 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.