Correlation Between GM and Pimco Municipal
Can any of the company-specific risk be diversified away by investing in both GM and Pimco Municipal 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 Pimco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Pimco Municipal Income, you can compare the effects of market volatilities on GM and Pimco Municipal 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 Pimco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Pimco Municipal.
Diversification Opportunities for GM and Pimco Municipal
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Pimco is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Pimco Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Municipal Income 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 Pimco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Municipal Income has no effect on the direction of GM i.e., GM and Pimco Municipal go up and down completely randomly.
Pair Corralation between GM and Pimco Municipal
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.49 times more return on investment than Pimco Municipal. However, GM is 2.49 times more volatile than Pimco Municipal Income. It trades about 0.11 of its potential returns per unit of risk. Pimco Municipal Income is currently generating about 0.05 per unit of risk. If you would invest 3,324 in General Motors on September 2, 2024 and sell it today you would earn a total of 2,235 from holding General Motors or generate 67.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Pimco Municipal Income
Performance |
| Timeline |
| General Motors |
| Pimco Municipal Income |
GM and Pimco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Pimco Municipal
The main advantage of trading using opposite GM and Pimco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Pimco Municipal 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 Pimco Municipal will offset losses from the drop in Pimco Municipal's long position.The idea behind General Motors and Pimco Municipal Income 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.| Pimco Municipal vs. Pimco Municipal Income | Pimco Municipal vs. Nuveen Municipal High | Pimco Municipal vs. Nuveen Municipal Credit | Pimco Municipal vs. Nuveen Amt Free Municipal |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |