Correlation Between GM and PowerShares
Can any of the company-specific risk be diversified away by investing in both GM and PowerShares 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 PowerShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and PowerShares DB Crude, you can compare the effects of market volatilities on GM and PowerShares 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 PowerShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and PowerShares.
Diversification Opportunities for GM and PowerShares
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and PowerShares is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and PowerShares DB Crude in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerShares DB Crude 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 PowerShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerShares DB Crude has no effect on the direction of GM i.e., GM and PowerShares go up and down completely randomly.
Pair Corralation between GM and PowerShares
If you would invest (100.00) in PowerShares DB Crude on September 15, 2024 and sell it today you would earn a total of 100.00 from holding PowerShares DB Crude or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
General Motors vs. PowerShares DB Crude
Performance |
| Timeline |
| General Motors |
| PowerShares DB Crude |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and PowerShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and PowerShares
The main advantage of trading using opposite GM and PowerShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, PowerShares 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 PowerShares will offset losses from the drop in PowerShares' long position.The idea behind General Motors and PowerShares DB Crude 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.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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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