Correlation Between GM and Morningstar Global
Can any of the company-specific risk be diversified away by investing in both GM and Morningstar Global 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 Morningstar Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Morningstar Global Income, you can compare the effects of market volatilities on GM and Morningstar Global 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 Morningstar Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Morningstar Global.
Diversification Opportunities for GM and Morningstar Global
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Morningstar is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Morningstar Global Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Global Income 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 Morningstar Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Global Income has no effect on the direction of GM i.e., GM and Morningstar Global go up and down completely randomly.
Pair Corralation between GM and Morningstar Global
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Morningstar Global. In addition to that, GM is 7.89 times more volatile than Morningstar Global Income. It trades about -0.34 of its total potential returns per unit of risk. Morningstar Global Income is currently generating about 0.36 per unit of volatility. If you would invest 943.00 in Morningstar Global Income on November 27, 2024 and sell it today you would earn a total of 20.00 from holding Morningstar Global Income or generate 2.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Morningstar Global Income
Performance |
| Timeline |
| General Motors |
| Morningstar Global Income |
GM and Morningstar Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Morningstar Global
The main advantage of trading using opposite GM and Morningstar Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Morningstar Global 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 Morningstar Global will offset losses from the drop in Morningstar Global's long position.The idea behind General Motors and Morningstar Global Income 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.| Morningstar Global vs. Franklin Adjustable Government | Morningstar Global vs. Us Government Securities | Morningstar Global vs. Us Government Securities | Morningstar Global vs. Transamerica Funds |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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