Correlation Between GM and SGI Dynamic
Can any of the company-specific risk be diversified away by investing in both GM and SGI Dynamic 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 SGI Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and SGI Dynamic Tactical, you can compare the effects of market volatilities on GM and SGI Dynamic 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 SGI Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SGI Dynamic.
Diversification Opportunities for GM and SGI Dynamic
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and SGI is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SGI Dynamic Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGI Dynamic Tactical 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 SGI Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGI Dynamic Tactical has no effect on the direction of GM i.e., GM and SGI Dynamic go up and down completely randomly.
Pair Corralation between GM and SGI Dynamic
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.71 times more return on investment than SGI Dynamic. However, GM is 3.71 times more volatile than SGI Dynamic Tactical. It trades about 0.12 of its potential returns per unit of risk. SGI Dynamic Tactical is currently generating about 0.33 per unit of risk. If you would invest 5,180 in General Motors on September 4, 2024 and sell it today you would earn a total of 324.00 from holding General Motors or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. SGI Dynamic Tactical
Performance |
| Timeline |
| General Motors |
| SGI Dynamic Tactical |
GM and SGI Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and SGI Dynamic
The main advantage of trading using opposite GM and SGI Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, SGI Dynamic 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 SGI Dynamic will offset losses from the drop in SGI Dynamic's long position.The idea behind General Motors and SGI Dynamic Tactical 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.| SGI Dynamic vs. iShares Core Aggressive | SGI Dynamic vs. Tidal Trust II | SGI Dynamic vs. SPDR SSgA Multi Asset | SGI Dynamic vs. SPDR SSgA Global |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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