Correlation Between GM and IShares SPASX
Can any of the company-specific risk be diversified away by investing in both GM and IShares SPASX 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 SPASX 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 SPASX Small, you can compare the effects of market volatilities on GM and IShares SPASX 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 SPASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and IShares SPASX.
Diversification Opportunities for GM and IShares SPASX
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and IShares is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and iShares SPASX Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPASX Small 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 SPASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPASX Small has no effect on the direction of GM i.e., GM and IShares SPASX go up and down completely randomly.
Pair Corralation between GM and IShares SPASX
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the IShares SPASX. In addition to that, GM is 4.59 times more volatile than iShares SPASX Small. It trades about -0.06 of its total potential returns per unit of risk. iShares SPASX Small is currently generating about 0.2 per unit of volatility. If you would invest 477.00 in iShares SPASX Small on November 4, 2024 and sell it today you would earn a total of 13.00 from holding iShares SPASX Small or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. iShares SPASX Small
Performance |
| Timeline |
| General Motors |
| iShares SPASX Small |
GM and IShares SPASX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and IShares SPASX
The main advantage of trading using opposite GM and IShares SPASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, IShares SPASX 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 SPASX will offset losses from the drop in IShares SPASX's long position.The idea behind General Motors and iShares SPASX Small 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 SPASX vs. iShares MSCI Emerging | IShares SPASX vs. iShares Global Aggregate | IShares SPASX vs. iShares CoreSP MidCap | IShares SPASX 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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