Correlation Between GM and Rational/pier
Can any of the company-specific risk be diversified away by investing in both GM and Rational/pier 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 Rational/pier into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Rationalpier 88 Convertible, you can compare the effects of market volatilities on GM and Rational/pier 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 Rational/pier. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Rational/pier.
Diversification Opportunities for GM and Rational/pier
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Rational/pier is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Rationalpier 88 Convertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rationalpier 88 Conv 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 Rational/pier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rationalpier 88 Conv has no effect on the direction of GM i.e., GM and Rational/pier go up and down completely randomly.
Pair Corralation between GM and Rational/pier
Allowing for the 90-day total investment horizon General Motors is expected to generate 4.92 times more return on investment than Rational/pier. However, GM is 4.92 times more volatile than Rationalpier 88 Convertible. It trades about 0.03 of its potential returns per unit of risk. Rationalpier 88 Convertible is currently generating about 0.05 per unit of risk. If you would invest 4,028 in General Motors on November 9, 2024 and sell it today you would earn a total of 765.00 from holding General Motors or generate 18.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.93% |
| Values | Daily Returns |
General Motors vs. Rationalpier 88 Convertible
Performance |
| Timeline |
| General Motors |
| Rationalpier 88 Conv |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
GM and Rational/pier Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Rational/pier
The main advantage of trading using opposite GM and Rational/pier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Rational/pier 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 Rational/pier will offset losses from the drop in Rational/pier's long position.The idea behind General Motors and Rationalpier 88 Convertible 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.| Rational/pier vs. Mesirow Financial Small | Rational/pier vs. Financial Industries Fund | Rational/pier vs. Prudential Financial Services | Rational/pier vs. Gabelli Global Financial |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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