Correlation Between GM and Purpose Global
Can any of the company-specific risk be diversified away by investing in both GM and Purpose Global 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 Purpose Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Purpose Global Bond, you can compare the effects of market volatilities on GM and Purpose Global 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 Purpose Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Purpose Global.
Diversification Opportunities for GM and Purpose Global
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Purpose is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Purpose Global Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purpose Global 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 Purpose Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purpose Global Bond has no effect on the direction of GM i.e., GM and Purpose Global go up and down completely randomly.
Pair Corralation between GM and Purpose Global
Allowing for the 90-day total investment horizon General Motors is expected to generate 6.89 times more return on investment than Purpose Global. However, GM is 6.89 times more volatile than Purpose Global Bond. It trades about 0.04 of its potential returns per unit of risk. Purpose Global Bond is currently generating about 0.09 per unit of risk. If you would invest 4,086 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,473 from holding General Motors or generate 36.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.78% |
| Values | Daily Returns |
General Motors vs. Purpose Global Bond
Performance |
| Timeline |
| General Motors |
| Purpose Global Bond |
GM and Purpose Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Purpose Global
The main advantage of trading using opposite GM and Purpose Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Purpose Global 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 Purpose Global will offset losses from the drop in Purpose Global's long position.The idea behind General Motors and Purpose Global 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.| Purpose Global vs. Evolve Active Canadian | Purpose Global vs. Evolve Banks Enhanced | Purpose Global vs. Evolve Global Materials | Purpose Global vs. Evolve Global Healthcare |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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