Correlation Between GM and AlphaMark Actively

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

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

Diversification Opportunities for GM and AlphaMark Actively

0.63

Correlation Coefficient

GM  AlphaMark Actively

Poor diversification

The 3 months correlation between GM and AlphaMark is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AlphaMark Actively Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlphaMark Actively 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 AlphaMark Actively. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlphaMark Actively has no effect on the direction of GM i.e., GM and AlphaMark Actively go up and down completely randomly.

Pair Corralation between GM and AlphaMark Actively

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.56 times more return on investment than AlphaMark Actively. However, GM is 1.56 times more volatile than AlphaMark Actively Managed. It trades about 0.11 of its potential returns per unit of risk. AlphaMark Actively Managed is currently generating about 0.08 per unit of risk. If you would invest  3,309  in General Motors on January 30, 2024 and sell it today you would earn a total of  1,275  from holding General Motors or generate 38.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.39%
Values	Daily Returns

General Motors  vs.  AlphaMark Actively Managed

General Motors

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 16 (%) 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.

AlphaMark Actively

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AlphaMark Actively Managed are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, AlphaMark Actively is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GM and AlphaMark Actively

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

The idea behind General Motors and AlphaMark Actively Managed 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.