Correlation Between GM and New Alternatives
Can any of the company-specific risk be diversified away by investing in both GM and New Alternatives 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 New Alternatives into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and New Alternatives Fund, you can compare the effects of market volatilities on GM and New Alternatives 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 New Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and New Alternatives.
Diversification Opportunities for GM and New Alternatives
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and New is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and New Alternatives Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Alternatives 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 New Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Alternatives has no effect on the direction of GM i.e., GM and New Alternatives go up and down completely randomly.
Pair Corralation between GM and New Alternatives
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.23 times more return on investment than New Alternatives. However, GM is 2.23 times more volatile than New Alternatives Fund. It trades about 0.09 of its potential returns per unit of risk. New Alternatives Fund is currently generating about -0.01 per unit of risk. If you would invest 4,476 in General Motors on August 29, 2024 and sell it today you would earn a total of 1,074 from holding General Motors or generate 23.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. New Alternatives Fund
Performance |
| Timeline |
| General Motors |
| New Alternatives |
GM and New Alternatives Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and New Alternatives
The main advantage of trading using opposite GM and New Alternatives positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, New Alternatives 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 New Alternatives will offset losses from the drop in New Alternatives' long position.The idea behind General Motors and New Alternatives Fund 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.| New Alternatives vs. Guinness Atkinson Alternative | New Alternatives vs. Calvert Global Energy | New Alternatives vs. Portfolio 21 Global | New Alternatives vs. Green Century Balanced |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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