Correlation Between GM and Airbus Group

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

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

Diversification Opportunities for GM and Airbus Group

0.0

Correlation Coefficient

GM  Airbus Group

Pay attention - limited upside

The 3 months correlation between GM and Airbus is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE 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 Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of GM i.e., GM and Airbus Group go up and down completely randomly.

Pair Corralation between GM and Airbus Group

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.44 times more return on investment than Airbus Group. However, GM is 1.44 times more volatile than Airbus Group SE. It trades about 0.06 of its potential returns per unit of risk. Airbus Group SE is currently generating about -0.26 per unit of risk. If you would invest  4,505  in General Motors on March 9, 2024 and sell it today you would earn a total of  67.00  from holding General Motors or generate 1.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Airbus Group SE

General Motors

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Airbus Group SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Airbus Group SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Airbus Group is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GM and Airbus Group

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

The idea behind General Motors and Airbus Group SE 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.