Correlation Between GM and Pace Smallmedium
Can any of the company-specific risk be diversified away by investing in both GM and Pace Smallmedium 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 Pace Smallmedium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Pace Smallmedium Value, you can compare the effects of market volatilities on GM and Pace Smallmedium 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 Pace Smallmedium. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Pace Smallmedium.
Diversification Opportunities for GM and Pace Smallmedium
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Pace is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Pace Smallmedium Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Smallmedium Value 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 Pace Smallmedium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Smallmedium Value has no effect on the direction of GM i.e., GM and Pace Smallmedium go up and down completely randomly.
Pair Corralation between GM and Pace Smallmedium
Allowing for the 90-day total investment horizon GM is expected to generate 1.47 times less return on investment than Pace Smallmedium. In addition to that, GM is 2.21 times more volatile than Pace Smallmedium Value. It trades about 0.07 of its total potential returns per unit of risk. Pace Smallmedium Value is currently generating about 0.24 per unit of volatility. If you would invest 2,062 in Pace Smallmedium Value on August 28, 2024 and sell it today you would earn a total of 144.00 from holding Pace Smallmedium Value or generate 6.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Pace Smallmedium Value
Performance |
| Timeline |
| General Motors |
| Pace Smallmedium Value |
GM and Pace Smallmedium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Pace Smallmedium
The main advantage of trading using opposite GM and Pace Smallmedium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Pace Smallmedium 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 Pace Smallmedium will offset losses from the drop in Pace Smallmedium's long position.The idea behind General Motors and Pace Smallmedium Value 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.| Pace Smallmedium vs. Dunham High Yield | Pace Smallmedium vs. Jpmorgan High Yield | Pace Smallmedium vs. Gmo High Yield | Pace Smallmedium vs. Lord Abbett High |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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