Correlation Between GM and Ishares III
Can any of the company-specific risk be diversified away by investing in both GM and Ishares III 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 III 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 III Plc, you can compare the effects of market volatilities on GM and Ishares III 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 III. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ishares III.
Diversification Opportunities for GM and Ishares III
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Ishares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ishares III Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares III Plc 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 III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares III Plc has no effect on the direction of GM i.e., GM and Ishares III go up and down completely randomly.
Pair Corralation between GM and Ishares III
Allowing for the 90-day total investment horizon General Motors is expected to generate 4.39 times more return on investment than Ishares III. However, GM is 4.39 times more volatile than Ishares III Plc. It trades about 0.16 of its potential returns per unit of risk. Ishares III Plc is currently generating about 0.37 per unit of risk. If you would invest 5,096 in General Motors on September 2, 2024 and sell it today you would earn a total of 463.00 from holding General Motors or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Ishares III Plc
Performance |
| Timeline |
| General Motors |
| Ishares III Plc |
GM and Ishares III Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Ishares III
The main advantage of trading using opposite GM and Ishares III positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Ishares III 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 III will offset losses from the drop in Ishares III's long position.The idea behind General Motors and Ishares III Plc 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 III vs. UBS Fund Solutions | Ishares III vs. Vanguard Funds Public | Ishares III vs. iShares Core SP | Ishares III vs. iShares Core MSCI |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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