Correlation Between GM and BCAP Mid
Can any of the company-specific risk be diversified away by investing in both GM and BCAP Mid 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 BCAP Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and BCAP Mid Small, you can compare the effects of market volatilities on GM and BCAP Mid 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 BCAP Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and BCAP Mid.
Diversification Opportunities for GM and BCAP Mid
Excellent diversification
The 3 months correlation between GM and BCAP is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BCAP Mid Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCAP Mid Small 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 BCAP Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCAP Mid Small has no effect on the direction of GM i.e., GM and BCAP Mid go up and down completely randomly.
Pair Corralation between GM and BCAP Mid
Allowing for the 90-day total investment horizon General Motors is expected to generate 4.07 times more return on investment than BCAP Mid. However, GM is 4.07 times more volatile than BCAP Mid Small. It trades about 0.14 of its potential returns per unit of risk. BCAP Mid Small is currently generating about -0.45 per unit of risk. If you would invest 5,180 in General Motors on September 3, 2024 and sell it today you would earn a total of 379.00 from holding General Motors or generate 7.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. BCAP Mid Small
Performance |
| Timeline |
| General Motors |
| BCAP Mid Small |
GM and BCAP Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and BCAP Mid
The main advantage of trading using opposite GM and BCAP Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, BCAP Mid 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 BCAP Mid will offset losses from the drop in BCAP Mid's long position.The idea behind General Motors and BCAP Mid Small 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.| BCAP Mid vs. ThaiDex SET50 Exchange | BCAP Mid vs. BCAP MSCI Thailand | BCAP Mid vs. BCAP SET100 | BCAP Mid vs. KTAM Gold ETF |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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