Correlation Between GM and AXIS Capital

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

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

Diversification Opportunities for GM and AXIS Capital

-0.23

Correlation Coefficient

GM  AXIS Capital

Very good diversification

The 3 months correlation between GM and AXIS is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AXIS Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXIS Capital Holdings 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 AXIS Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXIS Capital Holdings has no effect on the direction of GM i.e., GM and AXIS Capital go up and down completely randomly.

Pair Corralation between GM and AXIS Capital

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the AXIS Capital. In addition to that, GM is 2.32 times more volatile than AXIS Capital Holdings. It trades about -0.01 of its total potential returns per unit of risk. AXIS Capital Holdings is currently generating about 0.04 per unit of volatility. If you would invest  2,071  in AXIS Capital Holdings on December 26, 2024 and sell it today you would earn a total of  54.00  from holding AXIS Capital Holdings or generate 2.61% return on investment over 90 days.

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

General Motors  vs.  AXIS Capital Holdings

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.

AXIS Capital Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AXIS Capital Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, AXIS Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GM and AXIS Capital

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

The idea behind General Motors and AXIS Capital Holdings 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 Global Correlations module to find global opportunities by holding instruments from different markets.