Correlation Between GM and Ams AG

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

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

Diversification Opportunities for GM and Ams AG

-0.81

Correlation Coefficient

GM  Ams AG

Pay attention - limited upside

The 3 months correlation between GM and Ams is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ams AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ams AG 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 Ams AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ams AG has no effect on the direction of GM i.e., GM and Ams AG go up and down completely randomly.

Pair Corralation between GM and Ams AG

Allowing for the 90-day total investment horizon GM is expected to generate 21.16 times less return on investment than Ams AG. But when comparing it to its historical volatility, General Motors is 6.45 times less risky than Ams AG. It trades about 0.05 of its potential returns per unit of risk. ams AG is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  115.00  in ams AG on February 5, 2024 and sell it today you would earn a total of  34.00  from holding ams AG or generate 29.57% return on investment over 90 days.

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

General Motors  vs.  ams AG

General Motors

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 15 (%) 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.

ams AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ams AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GM and Ams AG

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

The idea behind General Motors and ams AG 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.