Correlation Between GM and Total Return
Can any of the company-specific risk be diversified away by investing in both GM and Total Return 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 Total Return into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Total Return Fund, you can compare the effects of market volatilities on GM and Total Return 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 Total Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Total Return.
Diversification Opportunities for GM and Total Return
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Total is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Total Return Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return 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 Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return has no effect on the direction of GM i.e., GM and Total Return go up and down completely randomly.
Pair Corralation between GM and Total Return
Allowing for the 90-day total investment horizon General Motors is expected to generate 5.23 times more return on investment than Total Return. However, GM is 5.23 times more volatile than Total Return Fund. It trades about 0.03 of its potential returns per unit of risk. Total Return Fund is currently generating about 0.05 per unit of risk. If you would invest 3,440 in General Motors on January 6, 2025 and sell it today you would earn a total of 978.00 from holding General Motors or generate 28.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Total Return Fund
Performance |
| Timeline |
| General Motors |
| Total Return |
GM and Total Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Total Return
The main advantage of trading using opposite GM and Total Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Total Return 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 Total Return will offset losses from the drop in Total Return's long position.The idea behind General Motors and Total Return 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.| Total Return vs. Schwab Health Care | Total Return vs. Blackrock Health Sciences | Total Return vs. Allianzgi Health Sciences | Total Return vs. The Hartford Healthcare |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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