Correlation Between GM and Aston Bay

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

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

Diversification Opportunities for GM and Aston Bay

-0.82

Correlation Coefficient

GM  Aston Bay

Pay attention - limited upside

The 3 months correlation between GM and Aston is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aston Bay Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aston Bay 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 Aston Bay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aston Bay Holdings has no effect on the direction of GM i.e., GM and Aston Bay go up and down completely randomly.

Pair Corralation between GM and Aston Bay

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.52 times more return on investment than Aston Bay. However, General Motors is 1.94 times less risky than Aston Bay. It trades about -0.13 of its potential returns per unit of risk. Aston Bay Holdings is currently generating about -0.11 per unit of risk. If you would invest  5,691  in General Motors on September 16, 2024 and sell it today you would lose (438.00) from holding General Motors or give up 7.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Aston Bay Holdings

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) 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.

Aston Bay Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aston Bay Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with GM and Aston Bay

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

The idea behind General Motors and Aston Bay 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.