Correlation Between GM and Diversified Real
Can any of the company-specific risk be diversified away by investing in both GM and Diversified Real 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 Diversified Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Diversified Real Asset, you can compare the effects of market volatilities on GM and Diversified Real 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 Diversified Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Diversified Real.
Diversification Opportunities for GM and Diversified Real
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Diversified is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Diversified Real Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Real Asset 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 Diversified Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Real Asset has no effect on the direction of GM i.e., GM and Diversified Real go up and down completely randomly.
Pair Corralation between GM and Diversified Real
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Diversified Real. In addition to that, GM is 7.03 times more volatile than Diversified Real Asset. It trades about -0.14 of its total potential returns per unit of risk. Diversified Real Asset is currently generating about 0.05 per unit of volatility. If you would invest 1,140 in Diversified Real Asset on September 13, 2024 and sell it today you would earn a total of 4.00 from holding Diversified Real Asset or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Diversified Real Asset
Performance |
| Timeline |
| General Motors |
| Diversified Real Asset |
GM and Diversified Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Diversified Real
The main advantage of trading using opposite GM and Diversified Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Diversified Real 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 Diversified Real will offset losses from the drop in Diversified Real's long position.The idea behind General Motors and Diversified Real Asset 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.| Diversified Real vs. Prudential Short Duration | Diversified Real vs. Easterly Snow Longshort | Diversified Real vs. Quantitative Longshort Equity | Diversified Real vs. Aqr Long Short Equity |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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