Correlation Between GM and High Yield
Can any of the company-specific risk be diversified away by investing in both GM and High Yield 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 High Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and High Yield Fund, you can compare the effects of market volatilities on GM and High Yield 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 High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and High Yield.
Diversification Opportunities for GM and High Yield
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and High is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and High Yield Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Fund 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 High Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Fund has no effect on the direction of GM i.e., GM and High Yield go up and down completely randomly.
Pair Corralation between GM and High Yield
Allowing for the 90-day total investment horizon General Motors is expected to generate 17.52 times more return on investment than High Yield. However, GM is 17.52 times more volatile than High Yield Fund. It trades about 0.07 of its potential returns per unit of risk. High Yield Fund is currently generating about 0.1 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. High Yield Fund
Performance |
| Timeline |
| General Motors |
| High Yield Fund |
GM and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and High Yield
The main advantage of trading using opposite GM and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, High Yield 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 High Yield will offset losses from the drop in High Yield's long position.The idea behind General Motors and High Yield 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.| High Yield vs. Ishares Municipal Bond | High Yield vs. Dws Government Money | High Yield vs. Multisector Bond Sma | High Yield vs. T Rowe Price |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| CEOs Directory Screen CEOs from public companies around the world | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |