Correlation Between GM and Aumann AG

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

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

Diversification Opportunities for GM and Aumann AG

-0.47

Correlation Coefficient

GM  Aumann AG

Very good diversification

The 3 months correlation between GM and Aumann is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aumann AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aumann AG 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 Aumann AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aumann AG has no effect on the direction of GM i.e., GM and Aumann AG go up and down completely randomly.

Pair Corralation between GM and Aumann AG

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.63 times more return on investment than Aumann AG. However, GM is 2.63 times more volatile than Aumann AG. It trades about 0.09 of its potential returns per unit of risk. Aumann AG is currently generating about -0.11 per unit of risk. If you would invest  4,833  in General Motors on September 4, 2024 and sell it today you would earn a total of  671.00  from holding General Motors or generate 13.88% return on investment over 90 days.

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

General Motors  vs.  Aumann AG

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Aumann AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aumann AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GM and Aumann AG

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

The idea behind General Motors and Aumann AG 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.