Correlation Between GM and Real Estate
Can any of the company-specific risk be diversified away by investing in both GM and Real Estate 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 Real Estate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Real Estate Fund, you can compare the effects of market volatilities on GM and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Real Estate.
Diversification Opportunities for GM and Real Estate
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and Real is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Real Estate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Fund 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Fund has no effect on the direction of GM i.e., GM and Real Estate go up and down completely randomly.
Pair Corralation between GM and Real Estate
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.78 times more return on investment than Real Estate. However, GM is 2.78 times more volatile than Real Estate Fund. It trades about 0.12 of its potential returns per unit of risk. Real Estate Fund is currently generating about 0.12 per unit of risk. If you would invest 5,197 in General Motors on August 31, 2024 and sell it today you would earn a total of 353.00 from holding General Motors or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Real Estate Fund
Performance |
| Timeline |
| General Motors |
| Real Estate Fund |
GM and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Real Estate
The main advantage of trading using opposite GM and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate's long position.The idea behind General Motors and Real Estate Fund 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.| Real Estate vs. Legg Mason Partners | Real Estate vs. Valic Company I | Real Estate vs. Prudential Short Duration | Real Estate vs. Gmo High Yield |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |