Correlation Between GM and Janus Forty
Can any of the company-specific risk be diversified away by investing in both GM and Janus Forty 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 Janus Forty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Janus Forty Fund, you can compare the effects of market volatilities on GM and Janus Forty 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 Janus Forty. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Janus Forty.
Diversification Opportunities for GM and Janus Forty
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Janus is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Janus Forty Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janus Forty Fund 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 Janus Forty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Forty Fund has no effect on the direction of GM i.e., GM and Janus Forty go up and down completely randomly.
Pair Corralation between GM and Janus Forty
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.96 times more return on investment than Janus Forty. However, GM is 1.96 times more volatile than Janus Forty Fund. It trades about 0.07 of its potential returns per unit of risk. Janus Forty Fund is currently generating about 0.09 per unit of risk. If you would invest 3,574 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,985 from holding General Motors or generate 55.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
General Motors vs. Janus Forty Fund
Performance |
| Timeline |
| General Motors |
| Janus Forty Fund |
GM and Janus Forty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Janus Forty
The main advantage of trading using opposite GM and Janus Forty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Janus Forty 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 Janus Forty will offset losses from the drop in Janus Forty's long position.The idea behind General Motors and Janus Forty 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.| Janus Forty vs. Janus Forty Fund | Janus Forty vs. Janus Forty Fund | Janus Forty vs. Janus Forty Fund | Janus Forty vs. Janus Forty Fund |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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