Correlation Between GM and Baird Municipal
Can any of the company-specific risk be diversified away by investing in both GM and Baird Municipal 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 Baird Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Baird Municipal Bond, you can compare the effects of market volatilities on GM and Baird Municipal 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 Baird Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Baird Municipal.
Diversification Opportunities for GM and Baird Municipal
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Baird is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Baird Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Municipal Bond 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 Baird Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Municipal Bond has no effect on the direction of GM i.e., GM and Baird Municipal go up and down completely randomly.
Pair Corralation between GM and Baird Municipal
Allowing for the 90-day total investment horizon General Motors is expected to generate 10.06 times more return on investment than Baird Municipal. However, GM is 10.06 times more volatile than Baird Municipal Bond. It trades about 0.05 of its potential returns per unit of risk. Baird Municipal Bond is currently generating about 0.09 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,754 from holding General Motors or generate 46.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Baird Municipal Bond
Performance |
| Timeline |
| General Motors |
| Baird Municipal Bond |
GM and Baird Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Baird Municipal
The main advantage of trading using opposite GM and Baird Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Baird Municipal 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 Baird Municipal will offset losses from the drop in Baird Municipal's long position.The idea behind General Motors and Baird Municipal Bond 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.| Baird Municipal vs. Qs Global Equity | Baird Municipal vs. Fm Investments Large | Baird Municipal vs. T Rowe Price | Baird Municipal vs. Nationwide Global Equity |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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