Correlation Between GM and MKAM ETF
Can any of the company-specific risk be diversified away by investing in both GM and MKAM ETF 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 MKAM ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and MKAM ETF, you can compare the effects of market volatilities on GM and MKAM ETF 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 MKAM ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and MKAM ETF.
Diversification Opportunities for GM and MKAM ETF
Poor diversification
The 3 months correlation between GM and MKAM is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and MKAM ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKAM 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 MKAM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKAM ETF has no effect on the direction of GM i.e., GM and MKAM ETF go up and down completely randomly.
Pair Corralation between GM and MKAM ETF
Allowing for the 90-day total investment horizon General Motors is expected to generate 5.3 times more return on investment than MKAM ETF. However, GM is 5.3 times more volatile than MKAM ETF. It trades about 0.05 of its potential returns per unit of risk. MKAM ETF is currently generating about 0.13 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,699 from holding General Motors or generate 44.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 83.64% |
| Values | Daily Returns |
General Motors vs. MKAM ETF
Performance |
| Timeline |
| General Motors |
| MKAM ETF |
GM and MKAM ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and MKAM ETF
The main advantage of trading using opposite GM and MKAM ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, MKAM ETF 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 MKAM ETF will offset losses from the drop in MKAM ETF's long position.The idea behind General Motors and MKAM 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.| MKAM ETF vs. FT Vest Equity | MKAM ETF vs. Northern Lights | MKAM ETF vs. Dimensional International High | MKAM ETF vs. JPMorgan Fundamental Data |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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