Correlation Between GM and Dfa Intl
Can any of the company-specific risk be diversified away by investing in both GM and Dfa Intl 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 Dfa Intl into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Dfa Intl Core, you can compare the effects of market volatilities on GM and Dfa Intl 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 Dfa Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Dfa Intl.
Diversification Opportunities for GM and Dfa Intl
Pay attention - limited upside
The 3 months correlation between GM and Dfa is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Dfa Intl Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Intl Core 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 Dfa Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Intl Core has no effect on the direction of GM i.e., GM and Dfa Intl go up and down completely randomly.
Pair Corralation between GM and Dfa Intl
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.6 times more return on investment than Dfa Intl. However, GM is 3.6 times more volatile than Dfa Intl Core. It trades about 0.16 of its potential returns per unit of risk. Dfa Intl Core is currently generating about 0.03 per unit of risk. If you would invest 5,096 in General Motors on September 2, 2024 and sell it today you would earn a total of 463.00 from holding General Motors or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Dfa Intl Core
Performance |
| Timeline |
| General Motors |
| Dfa Intl Core |
GM and Dfa Intl Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Dfa Intl
The main advantage of trading using opposite GM and Dfa Intl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Dfa Intl 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 Dfa Intl will offset losses from the drop in Dfa Intl's long position.The idea behind General Motors and Dfa Intl Core 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.| Dfa Intl vs. Calamos Dynamic Convertible | Dfa Intl vs. Harbor Vertible Securities | Dfa Intl vs. Rationalpier 88 Convertible | Dfa Intl vs. Lord Abbett Convertible |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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