Correlation Between GM and AVANTOR

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

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

Diversification Opportunities for GM and AVANTOR

-0.18

Correlation Coefficient

GM  AVANTOR

Good diversification

The 3 months correlation between GM and AVANTOR is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AVANTOR FDG INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVANTOR FDG INC 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 AVANTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVANTOR FDG INC has no effect on the direction of GM i.e., GM and AVANTOR go up and down completely randomly.

Pair Corralation between GM and AVANTOR

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the AVANTOR. In addition to that, GM is 10.14 times more volatile than AVANTOR FDG INC. It trades about -0.07 of its total potential returns per unit of risk. AVANTOR FDG INC is currently generating about 0.06 per unit of volatility. If you would invest  9,571  in AVANTOR FDG INC on December 29, 2024 and sell it today you would earn a total of  97.00  from holding AVANTOR FDG INC or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

General Motors  vs.  AVANTOR FDG INC

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.

AVANTOR FDG INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AVANTOR FDG INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AVANTOR 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 AVANTOR

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

The idea behind General Motors and AVANTOR FDG INC 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.