Correlation Between GM and Nasdaq 100
Can any of the company-specific risk be diversified away by investing in both GM and Nasdaq 100 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 Nasdaq 100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nasdaq 100, you can compare the effects of market volatilities on GM and Nasdaq 100 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 Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nasdaq 100.
Diversification Opportunities for GM and Nasdaq 100
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Nasdaq is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 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 Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 has no effect on the direction of GM i.e., GM and Nasdaq 100 go up and down completely randomly.
Pair Corralation between GM and Nasdaq 100
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.92 times more return on investment than Nasdaq 100. However, GM is 1.92 times more volatile than Nasdaq 100. It trades about 0.13 of its potential returns per unit of risk. Nasdaq 100 is currently generating about 0.11 per unit of risk. If you would invest 2,879 in General Motors on September 1, 2024 and sell it today you would earn a total of 2,680 from holding General Motors or generate 93.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.42% |
| Values | Daily Returns |
General Motors vs. Nasdaq 100
Performance |
| Timeline |
| General Motors |
| Nasdaq 100 |
GM and Nasdaq 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nasdaq 100
The main advantage of trading using opposite GM and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nasdaq 100 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.The idea behind General Motors and Nasdaq 100 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.| Nasdaq 100 vs. Brent Crude Oil | Nasdaq 100 vs. Natural Gas | Nasdaq 100 vs. Five Year Treasury Note | Nasdaq 100 vs. Micro Gold Futures |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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