Correlation Between GM and Aristotle International

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

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

Diversification Opportunities for GM and Aristotle International

-0.65

Correlation Coefficient

GM  Aristotle International

Excellent diversification

The 3 months correlation between GM and Aristotle is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aristotle International Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle 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 Aristotle International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle International has no effect on the direction of GM i.e., GM and Aristotle International go up and down completely randomly.

Pair Corralation between GM and Aristotle International

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.76 times more return on investment than Aristotle International. However, GM is 2.76 times more volatile than Aristotle International Eq. It trades about 0.12 of its potential returns per unit of risk. Aristotle International Eq is currently generating about 0.03 per unit of risk. If you would invest  2,873  in General Motors on October 1, 2024 and sell it today you would earn a total of  2,555  from holding General Motors or generate 88.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.85%
Values	Daily Returns

General Motors  vs.  Aristotle International Eq

General Motors

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Aristotle International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aristotle International Eq has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with GM and Aristotle International

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

The idea behind General Motors and Aristotle International Eq 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.