Correlation Between GM and AngloGold Ashanti

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

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

Diversification Opportunities for GM and AngloGold Ashanti

-0.6

Correlation Coefficient

GM  AngloGold Ashanti

Excellent diversification

The 3 months correlation between GM and AngloGold is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AngloGold Ashanti plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AngloGold Ashanti plc 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 AngloGold Ashanti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AngloGold Ashanti plc has no effect on the direction of GM i.e., GM and AngloGold Ashanti go up and down completely randomly.

Pair Corralation between GM and AngloGold Ashanti

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the AngloGold Ashanti. In addition to that, GM is 1.0 times more volatile than AngloGold Ashanti plc. It trades about -0.03 of its total potential returns per unit of risk. AngloGold Ashanti plc is currently generating about 0.29 per unit of volatility. If you would invest  2,314  in AngloGold Ashanti plc on December 26, 2024 and sell it today you would earn a total of  1,242  from holding AngloGold Ashanti plc or generate 53.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  AngloGold Ashanti plc

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.

AngloGold Ashanti plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AngloGold Ashanti plc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, AngloGold Ashanti unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and AngloGold Ashanti

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

The idea behind General Motors and AngloGold Ashanti plc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.