Correlation Between GM and Aim International

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

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

Diversification Opportunities for GM and Aim International

-0.63

Correlation Coefficient

GM  Aim International

Excellent diversification

The 3 months correlation between GM and Aim is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Aim International Mutual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aim International Mutual 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 Aim International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aim International Mutual has no effect on the direction of GM i.e., GM and Aim International go up and down completely randomly.

Pair Corralation between GM and Aim International

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Aim International. In addition to that, GM is 2.74 times more volatile than Aim International Mutual. It trades about -0.03 of its total potential returns per unit of risk. Aim International Mutual is currently generating about 0.09 per unit of volatility. If you would invest  3,707  in Aim International Mutual on December 24, 2024 and sell it today you would earn a total of  172.00  from holding Aim International Mutual or generate 4.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

General Motors  vs.  Aim International Mutual

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.

Aim International Mutual

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aim International Mutual are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Aim International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Aim International

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

The idea behind General Motors and Aim International Mutual 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.

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.