Correlation Between GM and Money Market
Can any of the company-specific risk be diversified away by investing in both GM and Money Market 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 Money Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Money Market Obligations, you can compare the effects of market volatilities on GM and Money Market 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 Money Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Money Market.
Diversification Opportunities for GM and Money Market
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Money is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Money Market Obligations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Money Market Obligations 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 Money Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Money Market Obligations has no effect on the direction of GM i.e., GM and Money Market go up and down completely randomly.
Pair Corralation between GM and Money Market
Allowing for the 90-day total investment horizon General Motors is expected to generate 25.81 times more return on investment than Money Market. However, GM is 25.81 times more volatile than Money Market Obligations. It trades about 0.08 of its potential returns per unit of risk. Money Market Obligations is currently generating about 0.09 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. Money Market Obligations
Performance |
| Timeline |
| General Motors |
| Money Market Obligations |
GM and Money Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Money Market
The main advantage of trading using opposite GM and Money Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Money Market 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 Money Market will offset losses from the drop in Money Market's long position.The idea behind General Motors and Money Market Obligations 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.| Money Market vs. Rbc Microcap Value | Money Market vs. T Rowe Price | Money Market vs. Volumetric Fund Volumetric | Money Market vs. Leggmason Partners Institutional |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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