Correlation Between GM and Federated Global
Can any of the company-specific risk be diversified away by investing in both GM and Federated Global 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 Federated Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Federated Global Allocation, you can compare the effects of market volatilities on GM and Federated Global 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 Federated Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Federated Global.
Diversification Opportunities for GM and Federated Global
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Federated is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Federated Global Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Global All 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 Federated Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Global All has no effect on the direction of GM i.e., GM and Federated Global go up and down completely randomly.
Pair Corralation between GM and Federated Global
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Federated Global. In addition to that, GM is 7.59 times more volatile than Federated Global Allocation. It trades about -0.16 of its total potential returns per unit of risk. Federated Global Allocation is currently generating about 0.22 per unit of volatility. If you would invest 2,067 in Federated Global Allocation on September 13, 2024 and sell it today you would earn a total of 32.00 from holding Federated Global Allocation or generate 1.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Federated Global Allocation
Performance |
| Timeline |
| General Motors |
| Federated Global All |
GM and Federated Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Federated Global
The main advantage of trading using opposite GM and Federated Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Federated Global 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 Federated Global will offset losses from the drop in Federated Global's long position.The idea behind General Motors and Federated Global Allocation 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.| Federated Global vs. Federated Hermes Mdt | Federated Global vs. Federated Mdt Large | Federated Global vs. Federated High Income | Federated Global vs. Federated Hermes Sdg |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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