Correlation Between GM and Mutual Of
Can any of the company-specific risk be diversified away by investing in both GM and Mutual Of 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 Mutual Of into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Mutual Of America, you can compare the effects of market volatilities on GM and Mutual Of 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 Mutual Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mutual Of.
Diversification Opportunities for GM and Mutual Of
Weak diversification
The 3 months correlation between GM and Mutual is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mutual Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mutual Of America 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 Mutual Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mutual Of America has no effect on the direction of GM i.e., GM and Mutual Of go up and down completely randomly.
Pair Corralation between GM and Mutual Of
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Mutual Of. In addition to that, GM is 6.39 times more volatile than Mutual Of America. It trades about -0.08 of its total potential returns per unit of risk. Mutual Of America is currently generating about 0.2 per unit of volatility. If you would invest 1,355 in Mutual Of America on November 18, 2024 and sell it today you would earn a total of 25.00 from holding Mutual Of America or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Mutual Of America
Performance |
| Timeline |
| General Motors |
| Mutual Of America |
GM and Mutual Of Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Mutual Of
The main advantage of trading using opposite GM and Mutual Of positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Mutual Of 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 Mutual Of will offset losses from the drop in Mutual Of's long position.The idea behind General Motors and Mutual Of America 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.| Mutual Of vs. Calvert Short Duration | Mutual Of vs. Riverpark Short Term | Mutual Of vs. Federated Government Ultrashort | Mutual Of vs. Fidelity Flex Servative |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |