Correlation Between GM and ASX

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

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

Diversification Opportunities for GM and ASX

0.22

Correlation Coefficient

GM  ASX

Modest diversification

The 3 months correlation between GM and ASX is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ASX LTD UNSPONSADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX LTD UNSPONSADR 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 ASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX LTD UNSPONSADR has no effect on the direction of GM i.e., GM and ASX go up and down completely randomly.

Pair Corralation between GM and ASX

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the ASX. In addition to that, GM is 1.35 times more volatile than ASX LTD UNSPONSADR. It trades about -0.1 of its total potential returns per unit of risk. ASX LTD UNSPONSADR is currently generating about 0.33 per unit of volatility. If you would invest  3,579  in ASX LTD UNSPONSADR on December 4, 2024 and sell it today you would earn a total of  381.00  from holding ASX LTD UNSPONSADR or generate 10.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  ASX LTD UNSPONSADR

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.

ASX LTD UNSPONSADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASX LTD UNSPONSADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ASX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM and ASX

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

The idea behind General Motors and ASX LTD UNSPONSADR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.