Correlation Between GM and Roundhill Investments
Can any of the company-specific risk be diversified away by investing in both GM and Roundhill Investments 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 Roundhill Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Roundhill Investments, you can compare the effects of market volatilities on GM and Roundhill Investments 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 Roundhill Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Roundhill Investments.
Diversification Opportunities for GM and Roundhill Investments
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GM and Roundhill is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Roundhill Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Investments 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 Roundhill Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Investments has no effect on the direction of GM i.e., GM and Roundhill Investments go up and down completely randomly.
Pair Corralation between GM and Roundhill Investments
If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 4.76% |
| Values | Daily Returns |
General Motors vs. Roundhill Investments
Performance |
| Timeline |
| General Motors |
| Roundhill Investments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Roundhill Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Roundhill Investments
The main advantage of trading using opposite GM and Roundhill Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Roundhill Investments 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 Roundhill Investments will offset losses from the drop in Roundhill Investments' long position.The idea behind General Motors and Roundhill Investments 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.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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