Correlation Between GM and Innovator Capital
Can any of the company-specific risk be diversified away by investing in both GM and Innovator Capital 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 Innovator Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Innovator Capital Management, you can compare the effects of market volatilities on GM and Innovator Capital 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 Innovator Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Innovator Capital.
Diversification Opportunities for GM and Innovator Capital
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Innovator is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Innovator Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Capital 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 Innovator Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Capital has no effect on the direction of GM i.e., GM and Innovator Capital go up and down completely randomly.
Pair Corralation between GM and Innovator Capital
Allowing for the 90-day total investment horizon General Motors is expected to generate 15.52 times more return on investment than Innovator Capital. However, GM is 15.52 times more volatile than Innovator Capital Management. It trades about 0.07 of its potential returns per unit of risk. Innovator Capital Management is currently generating about 0.44 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 8.29% |
| Values | Daily Returns |
General Motors vs. Innovator Capital Management
Performance |
| Timeline |
| General Motors |
| Innovator Capital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Innovator Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Innovator Capital
The main advantage of trading using opposite GM and Innovator Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Innovator Capital 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 Innovator Capital will offset losses from the drop in Innovator Capital's long position.The idea behind General Motors and Innovator Capital Management 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.| Innovator Capital vs. First Trust Exchange Traded | Innovator Capital vs. FT Cboe Vest | Innovator Capital vs. FT Cboe Vest |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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