Correlation Between GM and FlexShares ESG
Can any of the company-specific risk be diversified away by investing in both GM and FlexShares ESG 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 FlexShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and FlexShares ESG Climate, you can compare the effects of market volatilities on GM and FlexShares ESG 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 FlexShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and FlexShares ESG.
Diversification Opportunities for GM and FlexShares ESG
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and FlexShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and FlexShares ESG Climate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares ESG Climate 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 FlexShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares ESG Climate has no effect on the direction of GM i.e., GM and FlexShares ESG go up and down completely randomly.
Pair Corralation between GM and FlexShares ESG
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.29 times more return on investment than FlexShares ESG. However, GM is 3.29 times more volatile than FlexShares ESG Climate. It trades about 0.09 of its potential returns per unit of risk. FlexShares ESG Climate is currently generating about 0.18 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 277.00 from holding General Motors or generate 5.25% 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. FlexShares ESG Climate
Performance |
| Timeline |
| General Motors |
| FlexShares ESG Climate |
GM and FlexShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and FlexShares ESG
The main advantage of trading using opposite GM and FlexShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, FlexShares ESG 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 FlexShares ESG will offset losses from the drop in FlexShares ESG's long position.The idea behind General Motors and FlexShares ESG Climate 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.| FlexShares ESG vs. FlexShares ESG Climate | FlexShares ESG vs. FlexShares ESG Climate | FlexShares ESG vs. Nushares ETF Trust |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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