Correlation Between GM and Ag Growth

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

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

Diversification Opportunities for GM and Ag Growth

0.63

Correlation Coefficient

GM  Ag Growth

Poor diversification

The 3 months correlation between GM and AGGZF is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ag Growth International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ag Growth International 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 Ag Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ag Growth International has no effect on the direction of GM i.e., GM and Ag Growth go up and down completely randomly.

Pair Corralation between GM and Ag Growth

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.7 times more return on investment than Ag Growth. However, General Motors is 1.42 times less risky than Ag Growth. It trades about -0.01 of its potential returns per unit of risk. Ag Growth International is currently generating about -0.18 per unit of risk. If you would invest  5,404  in General Motors on December 26, 2024 and sell it today you would lose (145.00) from holding General Motors or give up 2.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.33%
Values	Daily Returns

General Motors  vs.  Ag Growth International

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 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.

Ag Growth International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ag Growth International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GM and Ag Growth

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

The idea behind General Motors and Ag Growth International 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.