Correlation Between GM and Defiance ETFs
Can any of the company-specific risk be diversified away by investing in both GM and Defiance ETFs 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 Defiance ETFs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Defiance ETFs, you can compare the effects of market volatilities on GM and Defiance ETFs 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 Defiance ETFs. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Defiance ETFs.
Diversification Opportunities for GM and Defiance ETFs
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Defiance is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Defiance ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance ETFs 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 Defiance ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance ETFs has no effect on the direction of GM i.e., GM and Defiance ETFs go up and down completely randomly.
Pair Corralation between GM and Defiance ETFs
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.0 times more return on investment than Defiance ETFs. However, GM is 2.0 times more volatile than Defiance ETFs. It trades about 0.12 of its potential returns per unit of risk. Defiance ETFs is currently generating about 0.1 per unit of risk. If you would invest 4,287 in General Motors on August 26, 2024 and sell it today you would earn a total of 1,566 from holding General Motors or generate 36.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 29.92% |
| Values | Daily Returns |
General Motors vs. Defiance ETFs
Performance |
| Timeline |
| General Motors |
| Defiance ETFs |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Defiance ETFs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Defiance ETFs
The main advantage of trading using opposite GM and Defiance ETFs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Defiance ETFs 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 Defiance ETFs will offset losses from the drop in Defiance ETFs' long position.The idea behind General Motors and Defiance ETFs 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.| Defiance ETFs vs. Global X Internet | Defiance ETFs vs. First Trust NASDAQ | Defiance ETFs vs. Global X Cloud | Defiance ETFs vs. Pacer Benchmark Data |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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