Correlation Between GM and International Portfolio
Can any of the company-specific risk be diversified away by investing in both GM and International Portfolio 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 International Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and International Portfolio International, you can compare the effects of market volatilities on GM and International Portfolio 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 International Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and International Portfolio.
Diversification Opportunities for GM and International Portfolio
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and International is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and International Portfolio Intern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Portfolio 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 International Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Portfolio has no effect on the direction of GM i.e., GM and International Portfolio go up and down completely randomly.
Pair Corralation between GM and International Portfolio
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.65 times more return on investment than International Portfolio. However, GM is 3.65 times more volatile than International Portfolio International. It trades about 0.17 of its potential returns per unit of risk. International Portfolio International is currently generating about -0.03 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. International Portfolio Intern
Performance |
| Timeline |
| General Motors |
| International Portfolio |
GM and International Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and International Portfolio
The main advantage of trading using opposite GM and International Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, International Portfolio 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 International Portfolio will offset losses from the drop in International Portfolio's long position.The idea behind General Motors and International Portfolio International 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.| International Portfolio vs. Small Cap Equity | International Portfolio vs. Large Cap E | International Portfolio vs. Aquagold International | International Portfolio vs. Thrivent High Yield |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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