Correlation Between GM and Arrow ETF
Can any of the company-specific risk be diversified away by investing in both GM and Arrow ETF 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 Arrow ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Arrow ETF Trust, you can compare the effects of market volatilities on GM and Arrow ETF 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 Arrow ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Arrow ETF.
Diversification Opportunities for GM and Arrow ETF
Excellent diversification
The 3 months correlation between GM and Arrow is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Arrow ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow ETF Trust 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 Arrow ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow ETF Trust has no effect on the direction of GM i.e., GM and Arrow ETF go up and down completely randomly.
Pair Corralation between GM and Arrow ETF
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.3 times more return on investment than Arrow ETF. However, GM is 3.3 times more volatile than Arrow ETF Trust. It trades about 0.09 of its potential returns per unit of risk. Arrow ETF Trust is currently generating about 0.08 per unit of risk. If you would invest 4,044 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,515 from holding General Motors or generate 37.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Arrow ETF Trust
Performance |
| Timeline |
| General Motors |
| Arrow ETF Trust |
GM and Arrow ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Arrow ETF
The main advantage of trading using opposite GM and Arrow ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Arrow ETF 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 Arrow ETF will offset losses from the drop in Arrow ETF's long position.The idea behind General Motors and Arrow ETF Trust 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.| Arrow ETF vs. iShares Morningstar Multi Asset | Arrow ETF vs. Amplify High Income | Arrow ETF vs. First Trust Multi Asset | Arrow ETF vs. SPDR SSgA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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