Correlation Between GM and AuraSource

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

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

Diversification Opportunities for GM and AuraSource

0.0

Correlation Coefficient

GM  AuraSource

Pay attention - limited upside

The 3 months correlation between GM and AuraSource is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AuraSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AuraSource 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 AuraSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AuraSource has no effect on the direction of GM i.e., GM and AuraSource go up and down completely randomly.

Pair Corralation between GM and AuraSource

If you would invest  0.00  in AuraSource on December 28, 2024 and sell it today you would earn a total of  0.00  from holding AuraSource or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

General Motors  vs.  AuraSource

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.

AuraSource

Risk-Adjusted Performance

Very Weak

Over the last 90 days AuraSource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, AuraSource is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GM and AuraSource

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

The idea behind General Motors and AuraSource 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.