Correlation Between GM and EGSHARES BLUE
Can any of the company-specific risk be diversified away by investing in both GM and EGSHARES BLUE 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 EGSHARES BLUE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and EGSHARES BLUE CHIP, you can compare the effects of market volatilities on GM and EGSHARES BLUE 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 EGSHARES BLUE. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and EGSHARES BLUE.
Diversification Opportunities for GM and EGSHARES BLUE
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and EGSHARES is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and EGSHARES BLUE CHIP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EGSHARES BLUE CHIP 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 EGSHARES BLUE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EGSHARES BLUE CHIP has no effect on the direction of GM i.e., GM and EGSHARES BLUE go up and down completely randomly.
Pair Corralation between GM and EGSHARES BLUE
Allowing for the 90-day total investment horizon GM is expected to generate 1.14 times less return on investment than EGSHARES BLUE. In addition to that, GM is 2.71 times more volatile than EGSHARES BLUE CHIP. It trades about 0.07 of its total potential returns per unit of risk. EGSHARES BLUE CHIP is currently generating about 0.23 per unit of volatility. If you would invest 3,288 in EGSHARES BLUE CHIP on August 29, 2024 and sell it today you would earn a total of 177.00 from holding EGSHARES BLUE CHIP or generate 5.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. EGSHARES BLUE CHIP
Performance |
| Timeline |
| General Motors |
| EGSHARES BLUE CHIP |
GM and EGSHARES BLUE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and EGSHARES BLUE
The main advantage of trading using opposite GM and EGSHARES BLUE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, EGSHARES BLUE 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 EGSHARES BLUE will offset losses from the drop in EGSHARES BLUE's long position.The idea behind General Motors and EGSHARES BLUE CHIP 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.| EGSHARES BLUE vs. FT Vest Equity | EGSHARES BLUE vs. Northern Lights | EGSHARES BLUE vs. Dimensional International High | EGSHARES BLUE vs. First Trust Exchange Traded |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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