Correlation Between GM and IShares Euro
Can any of the company-specific risk be diversified away by investing in both GM and IShares Euro 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 IShares Euro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and iShares Euro Government, you can compare the effects of market volatilities on GM and IShares Euro 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 IShares Euro. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and IShares Euro.
Diversification Opportunities for GM and IShares Euro
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and IShares is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and iShares Euro Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Euro Government 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 IShares Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Euro Government has no effect on the direction of GM i.e., GM and IShares Euro go up and down completely randomly.
Pair Corralation between GM and IShares Euro
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the IShares Euro. In addition to that, GM is 16.22 times more volatile than iShares Euro Government. It trades about -0.22 of its total potential returns per unit of risk. iShares Euro Government is currently generating about 0.24 per unit of volatility. If you would invest 16,095 in iShares Euro Government on November 28, 2024 and sell it today you would earn a total of 132.00 from holding iShares Euro Government or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. iShares Euro Government
Performance |
| Timeline |
| General Motors |
| iShares Euro Government |
GM and IShares Euro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and IShares Euro
The main advantage of trading using opposite GM and IShares Euro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, IShares Euro 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 IShares Euro will offset losses from the drop in IShares Euro's long position.The idea behind General Motors and iShares Euro Government 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.| IShares Euro vs. Vanguard SP 500 | IShares Euro vs. SPDR Dow Jones | IShares Euro vs. iShares Core MSCI | IShares Euro vs. iShares SP 500 |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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