Correlation Between GM and Alpha Trust

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

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

Diversification Opportunities for GM and Alpha Trust

0.11

Correlation Coefficient

GM  Alpha Trust

Average diversification

The 3 months correlation between GM and Alpha is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Alpha Trust Andromeda in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Trust Andromeda 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 Alpha Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Trust Andromeda has no effect on the direction of GM i.e., GM and Alpha Trust go up and down completely randomly.

Pair Corralation between GM and Alpha Trust

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Alpha Trust. In addition to that, GM is 2.87 times more volatile than Alpha Trust Andromeda. It trades about -0.08 of its total potential returns per unit of risk. Alpha Trust Andromeda is currently generating about 0.13 per unit of volatility. If you would invest  632.00  in Alpha Trust Andromeda on October 22, 2024 and sell it today you would earn a total of  8.00  from holding Alpha Trust Andromeda or generate 1.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.21%
Values	Daily Returns

General Motors  vs.  Alpha Trust Andromeda

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.

Alpha Trust Andromeda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Trust Andromeda has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alpha Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Alpha Trust

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

The idea behind General Motors and Alpha Trust Andromeda 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.