Correlation Between GM and Quadratic Deflation
Can any of the company-specific risk be diversified away by investing in both GM and Quadratic Deflation 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 Quadratic Deflation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Quadratic Deflation ETF, you can compare the effects of market volatilities on GM and Quadratic Deflation 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 Quadratic Deflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Quadratic Deflation.
Diversification Opportunities for GM and Quadratic Deflation
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Quadratic is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Quadratic Deflation ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quadratic Deflation ETF 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 Quadratic Deflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quadratic Deflation ETF has no effect on the direction of GM i.e., GM and Quadratic Deflation go up and down completely randomly.
Pair Corralation between GM and Quadratic Deflation
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.74 times more return on investment than Quadratic Deflation. However, GM is 2.74 times more volatile than Quadratic Deflation ETF. It trades about 0.09 of its potential returns per unit of risk. Quadratic Deflation ETF is currently generating about -0.02 per unit of risk. If you would invest 4,044 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,515 from holding General Motors or generate 37.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Quadratic Deflation ETF
Performance |
| Timeline |
| General Motors |
| Quadratic Deflation ETF |
GM and Quadratic Deflation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Quadratic Deflation
The main advantage of trading using opposite GM and Quadratic Deflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Quadratic Deflation 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 Quadratic Deflation will offset losses from the drop in Quadratic Deflation's long position.The idea behind General Motors and Quadratic Deflation ETF 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.| Quadratic Deflation vs. SPDR Barclays Short | Quadratic Deflation vs. SPDR Portfolio Intermediate | Quadratic Deflation vs. SPDR Barclays Long | Quadratic Deflation vs. SPDR Barclays Intermediate |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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