Correlation Between GM and WisdomTree Broad
Can any of the company-specific risk be diversified away by investing in both GM and WisdomTree Broad 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 WisdomTree Broad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and WisdomTree Broad Commodities, you can compare the effects of market volatilities on GM and WisdomTree Broad 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 WisdomTree Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and WisdomTree Broad.
Diversification Opportunities for GM and WisdomTree Broad
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and WisdomTree is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and WisdomTree Broad Commodities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Broad Com 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 WisdomTree Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Broad Com has no effect on the direction of GM i.e., GM and WisdomTree Broad go up and down completely randomly.
Pair Corralation between GM and WisdomTree Broad
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the WisdomTree Broad. In addition to that, GM is 2.84 times more volatile than WisdomTree Broad Commodities. It trades about -0.32 of its total potential returns per unit of risk. WisdomTree Broad Commodities is currently generating about 0.1 per unit of volatility. If you would invest 91,875 in WisdomTree Broad Commodities on November 28, 2024 and sell it today you would earn a total of 1,588 from holding WisdomTree Broad Commodities or generate 1.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. WisdomTree Broad Commodities
Performance |
| Timeline |
| General Motors |
| WisdomTree Broad Com |
GM and WisdomTree Broad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and WisdomTree Broad
The main advantage of trading using opposite GM and WisdomTree Broad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, WisdomTree Broad 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 WisdomTree Broad will offset losses from the drop in WisdomTree Broad's long position.The idea behind General Motors and WisdomTree Broad Commodities 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.| WisdomTree Broad vs. WisdomTree Zinc | WisdomTree Broad vs. WisdomTree Brent Crude | WisdomTree Broad vs. WisdomTree Aluminium 2x | WisdomTree Broad vs. WisdomTree Enhanced Commodity |
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.
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