Correlation Between GM and Allied Properties

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

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

Diversification Opportunities for GM and Allied Properties

0.23

Correlation Coefficient

GM  Allied Properties

Modest diversification

The 3 months correlation between GM and Allied is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Allied Properties Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Properties Real 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 Allied Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Properties Real has no effect on the direction of GM i.e., GM and Allied Properties go up and down completely randomly.

Pair Corralation between GM and Allied Properties

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Allied Properties. In addition to that, GM is 2.42 times more volatile than Allied Properties Real. It trades about -0.06 of its total potential returns per unit of risk. Allied Properties Real is currently generating about -0.01 per unit of volatility. If you would invest  1,687  in Allied Properties Real on December 28, 2024 and sell it today you would lose (15.00) from holding Allied Properties Real or give up 0.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

General Motors  vs.  Allied Properties Real

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Allied Properties Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allied Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allied Properties is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Allied Properties

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

The idea behind General Motors and Allied Properties Real 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.