Correlation Between GM and WisdomTree Grains
Can any of the company-specific risk be diversified away by investing in both GM and WisdomTree Grains 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 Grains 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 Grains, you can compare the effects of market volatilities on GM and WisdomTree Grains 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 Grains. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and WisdomTree Grains.
Diversification Opportunities for GM and WisdomTree Grains
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and WisdomTree is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and WisdomTree Grains in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Grains 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 Grains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Grains has no effect on the direction of GM i.e., GM and WisdomTree Grains go up and down completely randomly.
Pair Corralation between GM and WisdomTree Grains
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.34 times more return on investment than WisdomTree Grains. However, GM is 2.34 times more volatile than WisdomTree Grains. It trades about 0.08 of its potential returns per unit of risk. WisdomTree Grains is currently generating about -0.13 per unit of risk. If you would invest 4,503 in General Motors on September 2, 2024 and sell it today you would earn a total of 1,056 from holding General Motors or generate 23.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
General Motors vs. WisdomTree Grains
Performance |
| Timeline |
| General Motors |
| WisdomTree Grains |
GM and WisdomTree Grains Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and WisdomTree Grains
The main advantage of trading using opposite GM and WisdomTree Grains positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, WisdomTree Grains 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 Grains will offset losses from the drop in WisdomTree Grains' long position.The idea behind General Motors and WisdomTree Grains 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 Grains vs. Leverage Shares 3x | WisdomTree Grains vs. WisdomTree Natural Gas | WisdomTree Grains vs. GraniteShares 3x Short | WisdomTree Grains vs. Leverage Shares 3x |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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