Correlation Between GM and IShares Technology
Can any of the company-specific risk be diversified away by investing in both GM and IShares Technology 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 Technology 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 Technology ETF, you can compare the effects of market volatilities on GM and IShares Technology 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 Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and IShares Technology.
Diversification Opportunities for GM and IShares Technology
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and iShares Technology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Technology ETF 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 Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Technology ETF has no effect on the direction of GM i.e., GM and IShares Technology go up and down completely randomly.
Pair Corralation between GM and IShares Technology
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.44 times more return on investment than IShares Technology. However, GM is 1.44 times more volatile than iShares Technology ETF. It trades about 0.26 of its potential returns per unit of risk. iShares Technology ETF is currently generating about 0.08 per unit of risk. If you would invest 5,273 in General Motors on August 27, 2024 and sell it today you would earn a total of 580.00 from holding General Motors or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. iShares Technology ETF
Performance |
| Timeline |
| General Motors |
| iShares Technology ETF |
GM and IShares Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and IShares Technology
The main advantage of trading using opposite GM and IShares Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, IShares Technology 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 Technology will offset losses from the drop in IShares Technology's long position.The idea behind General Motors and iShares Technology ETF 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 Technology vs. Invesco DWA Utilities | IShares Technology vs. Invesco Dynamic Large | IShares Technology vs. Invesco Dynamic Large | IShares Technology vs. HUMANA INC |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |