Correlation Between GM and IQ MacKay
Can any of the company-specific risk be diversified away by investing in both GM and IQ MacKay 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 IQ MacKay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and IQ MacKay ESG, you can compare the effects of market volatilities on GM and IQ MacKay 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 IQ MacKay. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and IQ MacKay.
Diversification Opportunities for GM and IQ MacKay
Very weak diversification
The 3 months correlation between GM and IQHI is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and IQ MacKay ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ MacKay ESG 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 IQ MacKay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ MacKay ESG has no effect on the direction of GM i.e., GM and IQ MacKay go up and down completely randomly.
Pair Corralation between GM and IQ MacKay
Allowing for the 90-day total investment horizon General Motors is expected to generate 9.32 times more return on investment than IQ MacKay. However, GM is 9.32 times more volatile than IQ MacKay ESG. It trades about 0.09 of its potential returns per unit of risk. IQ MacKay ESG is currently generating about 0.17 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 Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. IQ MacKay ESG
Performance |
| Timeline |
| General Motors |
| IQ MacKay ESG |
GM and IQ MacKay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and IQ MacKay
The main advantage of trading using opposite GM and IQ MacKay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, IQ MacKay 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 IQ MacKay will offset losses from the drop in IQ MacKay's long position.The idea behind General Motors and IQ MacKay ESG 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.| IQ MacKay vs. IndexIQ Active ETF | IQ MacKay vs. IndexIQ Active ETF | IQ MacKay vs. SSGA Active Trust | IQ MacKay vs. BlackRock Intermediate Muni |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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