Correlation Between GM and Baron Emerging
Can any of the company-specific risk be diversified away by investing in both GM and Baron Emerging 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 Baron Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Baron Emerging Markets, you can compare the effects of market volatilities on GM and Baron Emerging 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 Baron Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Baron Emerging.
Diversification Opportunities for GM and Baron Emerging
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Baron is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Baron Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Emerging Markets 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 Baron Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Emerging Markets has no effect on the direction of GM i.e., GM and Baron Emerging go up and down completely randomly.
Pair Corralation between GM and Baron Emerging
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Baron Emerging. In addition to that, GM is 2.77 times more volatile than Baron Emerging Markets. It trades about -0.09 of its total potential returns per unit of risk. Baron Emerging Markets is currently generating about 0.08 per unit of volatility. If you would invest 1,497 in Baron Emerging Markets on November 9, 2024 and sell it today you would earn a total of 24.00 from holding Baron Emerging Markets or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Baron Emerging Markets
Performance |
| Timeline |
| General Motors |
| Baron Emerging Markets |
GM and Baron Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Baron Emerging
The main advantage of trading using opposite GM and Baron Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Baron Emerging 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 Baron Emerging will offset losses from the drop in Baron Emerging's long position.The idea behind General Motors and Baron Emerging Markets 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.| Baron Emerging vs. Eaton Vance Income | Baron Emerging vs. Baird Aggregate Bond | Baron Emerging vs. Champlain Small | Baron Emerging vs. Mfs Emerging Markets |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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