Correlation Between GM and Themes Natural
Can any of the company-specific risk be diversified away by investing in both GM and Themes Natural 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 Themes Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Themes Natural Monopoly, you can compare the effects of market volatilities on GM and Themes Natural 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 Themes Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Themes Natural.
Diversification Opportunities for GM and Themes Natural
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Themes is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Themes Natural Monopoly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Natural Monopoly 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 Themes Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Natural Monopoly has no effect on the direction of GM i.e., GM and Themes Natural go up and down completely randomly.
Pair Corralation between GM and Themes Natural
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.46 times more return on investment than Themes Natural. However, GM is 2.46 times more volatile than Themes Natural Monopoly. It trades about 0.08 of its potential returns per unit of risk. Themes Natural Monopoly is currently generating about 0.11 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. Themes Natural Monopoly
Performance |
| Timeline |
| General Motors |
| Themes Natural Monopoly |
GM and Themes Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Themes Natural
The main advantage of trading using opposite GM and Themes Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Themes Natural 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 Themes Natural will offset losses from the drop in Themes Natural's long position.The idea behind General Motors and Themes Natural Monopoly 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.| Themes Natural vs. Vanguard Total Stock | Themes Natural vs. SPDR SP 500 | Themes Natural vs. iShares Core SP | Themes Natural vs. Vanguard Dividend Appreciation |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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