Correlation Between GM and Fixed Income
Can any of the company-specific risk be diversified away by investing in both GM and Fixed Income 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 Fixed Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fixed Income Shares, you can compare the effects of market volatilities on GM and Fixed Income 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 Fixed Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fixed Income.
Diversification Opportunities for GM and Fixed Income
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Fixed is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fixed Income Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fixed Income Shares 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 Fixed Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fixed Income Shares has no effect on the direction of GM i.e., GM and Fixed Income go up and down completely randomly.
Pair Corralation between GM and Fixed Income
Allowing for the 90-day total investment horizon General Motors is expected to generate 6.99 times more return on investment than Fixed Income. However, GM is 6.99 times more volatile than Fixed Income Shares. It trades about 0.12 of its potential returns per unit of risk. Fixed Income Shares is currently generating about 0.17 per unit of risk. If you would invest 5,180 in General Motors on September 4, 2024 and sell it today you would earn a total of 324.00 from holding General Motors or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. Fixed Income Shares
Performance |
| Timeline |
| General Motors |
| Fixed Income Shares |
GM and Fixed Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Fixed Income
The main advantage of trading using opposite GM and Fixed Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fixed Income 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 Fixed Income will offset losses from the drop in Fixed Income's long position.The idea behind General Motors and Fixed Income Shares 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.| Fixed Income vs. Ab High Income | Fixed Income vs. Vanguard Star Fund | Fixed Income vs. T Rowe Price | Fixed Income vs. Artisan High Income |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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