Correlation Between GM and Emerald Growth
Can any of the company-specific risk be diversified away by investing in both GM and Emerald Growth 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 Emerald Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Emerald Growth Fund, you can compare the effects of market volatilities on GM and Emerald Growth 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 Emerald Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Emerald Growth.
Diversification Opportunities for GM and Emerald Growth
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Emerald is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Emerald Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Growth 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 Emerald Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Growth has no effect on the direction of GM i.e., GM and Emerald Growth go up and down completely randomly.
Pair Corralation between GM and Emerald Growth
Allowing for the 90-day total investment horizon GM is expected to generate 1.81 times less return on investment than Emerald Growth. In addition to that, GM is 1.67 times more volatile than Emerald Growth Fund. It trades about 0.07 of its total potential returns per unit of risk. Emerald Growth Fund is currently generating about 0.22 per unit of volatility. If you would invest 1,714 in Emerald Growth Fund on August 29, 2024 and sell it today you would earn a total of 147.00 from holding Emerald Growth Fund or generate 8.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Emerald Growth Fund
Performance |
| Timeline |
| General Motors |
| Emerald Growth |
GM and Emerald Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Emerald Growth
The main advantage of trading using opposite GM and Emerald Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Emerald Growth 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 Emerald Growth will offset losses from the drop in Emerald Growth's long position.The idea behind General Motors and Emerald Growth Fund 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.| Emerald Growth vs. Emerald Growth Fund | Emerald Growth vs. Emerald Growth Fund | Emerald Growth vs. Emerald Banking And | Emerald Growth vs. Nuveen Small Cap |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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