Correlation Between GM and Polen International
Can any of the company-specific risk be diversified away by investing in both GM and Polen International 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 Polen International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Polen International Growth, you can compare the effects of market volatilities on GM and Polen International 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 Polen International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Polen International.
Diversification Opportunities for GM and Polen International
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and POLEN is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Polen International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polen International 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 Polen International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polen International has no effect on the direction of GM i.e., GM and Polen International go up and down completely randomly.
Pair Corralation between GM and Polen International
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Polen International. In addition to that, GM is 2.62 times more volatile than Polen International Growth. It trades about -0.32 of its total potential returns per unit of risk. Polen International Growth is currently generating about 0.1 per unit of volatility. If you would invest 1,643 in Polen International Growth on November 28, 2024 and sell it today you would earn a total of 29.00 from holding Polen International Growth or generate 1.77% 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. Polen International Growth
Performance |
| Timeline |
| General Motors |
| Polen International |
GM and Polen International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Polen International
The main advantage of trading using opposite GM and Polen International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Polen International 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 Polen International will offset losses from the drop in Polen International's long position.The idea behind General Motors and Polen International Growth 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.| Polen International vs. Polen Growth Fund | Polen International vs. Congress Mid Cap | Polen International vs. Polen Global Growth | Polen International vs. Zacks Dividend Fund |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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