Correlation Between GM and Innovator MSCI
Can any of the company-specific risk be diversified away by investing in both GM and Innovator MSCI 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 MSCI 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 MSCI Emerging, you can compare the effects of market volatilities on GM and Innovator MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Innovator MSCI.
Diversification Opportunities for GM and Innovator MSCI
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Innovator is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Innovator MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator MSCI Emerging 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator MSCI Emerging has no effect on the direction of GM i.e., GM and Innovator MSCI go up and down completely randomly.
Pair Corralation between GM and Innovator MSCI
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.13 times more return on investment than Innovator MSCI. However, GM is 3.13 times more volatile than Innovator MSCI Emerging. It trades about 0.03 of its potential returns per unit of risk. Innovator MSCI Emerging is currently generating about 0.03 per unit of risk. If you would invest 3,794 in General Motors on November 19, 2024 and sell it today you would earn a total of 1,043 from holding General Motors or generate 27.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Innovator MSCI Emerging
Performance |
| Timeline |
| General Motors |
| Innovator MSCI Emerging |
GM and Innovator MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Innovator MSCI
The main advantage of trading using opposite GM and Innovator MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Innovator MSCI 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 MSCI will offset losses from the drop in Innovator MSCI's long position.The idea behind General Motors and Innovator MSCI Emerging 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 MSCI vs. Innovator Nasdaq 100 Power | Innovator MSCI vs. Innovator Russell 2000 | Innovator MSCI vs. Innovator MSCI EAFE | Innovator MSCI vs. Innovator Growth 100 Power |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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