Correlation Between GM and IShares Focused
Can any of the company-specific risk be diversified away by investing in both GM and IShares Focused 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 IShares Focused into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and iShares Focused Value, you can compare the effects of market volatilities on GM and IShares Focused 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 IShares Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and IShares Focused.
Diversification Opportunities for GM and IShares Focused
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and IShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and iShares Focused Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Focused Value 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 IShares Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Focused Value has no effect on the direction of GM i.e., GM and IShares Focused go up and down completely randomly.
Pair Corralation between GM and IShares Focused
Allowing for the 90-day total investment horizon GM is expected to generate 1.04 times less return on investment than IShares Focused. In addition to that, GM is 1.98 times more volatile than iShares Focused Value. It trades about 0.08 of its total potential returns per unit of risk. iShares Focused Value is currently generating about 0.17 per unit of volatility. If you would invest 6,005 in iShares Focused Value on September 1, 2024 and sell it today you would earn a total of 1,601 from holding iShares Focused Value or generate 26.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. iShares Focused Value
Performance |
| Timeline |
| General Motors |
| iShares Focused Value |
GM and IShares Focused Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and IShares Focused
The main advantage of trading using opposite GM and IShares Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, IShares Focused 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 IShares Focused will offset losses from the drop in IShares Focused's long position.The idea behind General Motors and iShares Focused Value 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.| IShares Focused vs. Vanguard Mid Cap Value | IShares Focused vs. SPDR SP Dividend | IShares Focused vs. Pacer Cash Cows | IShares Focused vs. iShares SP Mid Cap |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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