Correlation Between GM and Algorand

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Can any of the company-specific risk be diversified away by investing in both GM and Algorand 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 Algorand into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Algorand, you can compare the effects of market volatilities on GM and Algorand 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 Algorand. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Algorand.

Diversification Opportunities for GM and Algorand

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between GM and Algorand is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Algorand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algorand 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 Algorand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algorand has no effect on the direction of GM i.e., GM and Algorand go up and down completely randomly.

Pair Corralation between GM and Algorand

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.45 times more return on investment than Algorand. However, General Motors is 2.2 times less risky than Algorand. It trades about 0.01 of its potential returns per unit of risk. Algorand is currently generating about -0.08 per unit of risk. If you would invest  3,221  in General Motors on July 3, 2022 and sell it today you would lose (12.00)  from holding General Motors or give up 0.37% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy49.8%
ValuesDaily Returns

General Motors  vs.  Algorand

 Performance (%) 
       Timeline  
General Motors 
GM Performance
0 of 100
Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady primary indicators, GM is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

GM Price Channel

Algorand 
Algorand Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Algorand are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Algorand sustained solid returns over the last few months and may actually be approaching a breakup point.

Algorand Price Channel

GM and Algorand Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Algorand

The main advantage of trading using opposite GM and Algorand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Algorand 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 Algorand will offset losses from the drop in Algorand's long position.
GM vs. Amazon Inc
The idea behind General Motors and Algorand 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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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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