Correlation Between GM and Amphenol

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

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

Diversification Opportunities for GM and Amphenol

0.83

Correlation Coefficient

GM  Amphenol

Very poor diversification

The 3 months correlation between GM and Amphenol is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Amphenol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amphenol 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 Amphenol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amphenol has no effect on the direction of GM i.e., GM and Amphenol go up and down completely randomly.

Pair Corralation between GM and Amphenol

Allowing for the 90-day total investment horizon GM is expected to generate 1.28 times less return on investment than Amphenol. In addition to that, GM is 1.31 times more volatile than Amphenol. It trades about 0.05 of its total potential returns per unit of risk. Amphenol is currently generating about 0.09 per unit of volatility. If you would invest  3,521  in Amphenol on September 23, 2024 and sell it today you would earn a total of  3,279  from holding Amphenol or generate 93.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.03%
Values	Daily Returns

General Motors  vs.  Amphenol

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amphenol

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amphenol are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Amphenol reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Amphenol

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

The idea behind General Motors and Amphenol 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.