Correlation Between GM and Aboitiz Equity

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

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

Diversification Opportunities for GM and Aboitiz Equity

-0.72

Correlation Coefficient

GM  Aboitiz Equity

Pay attention - limited upside

The 3 months correlation between GM and Aboitiz is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aboitiz Equity Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aboitiz Equity Ventures 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 Aboitiz Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aboitiz Equity Ventures has no effect on the direction of GM i.e., GM and Aboitiz Equity go up and down completely randomly.

Pair Corralation between GM and Aboitiz Equity

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.14 times more return on investment than Aboitiz Equity. However, GM is 1.14 times more volatile than Aboitiz Equity Ventures. It trades about 0.05 of its potential returns per unit of risk. Aboitiz Equity Ventures is currently generating about -0.06 per unit of risk. If you would invest  4,570  in General Motors on September 24, 2024 and sell it today you would earn a total of  611.00  from holding General Motors or generate 13.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.8%
Values	Daily Returns

General Motors  vs.  Aboitiz Equity Ventures

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) 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.

Aboitiz Equity Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aboitiz Equity Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with GM and Aboitiz Equity

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

The idea behind General Motors and Aboitiz Equity Ventures 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..