Correlation Between GM and FlexShares Quality
Can any of the company-specific risk be diversified away by investing in both GM and FlexShares Quality 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 FlexShares Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and FlexShares Quality Dividend, you can compare the effects of market volatilities on GM and FlexShares Quality 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 FlexShares Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and FlexShares Quality.
Diversification Opportunities for GM and FlexShares Quality
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and FlexShares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and FlexShares Quality Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Quality 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 FlexShares Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Quality has no effect on the direction of GM i.e., GM and FlexShares Quality go up and down completely randomly.
Pair Corralation between GM and FlexShares Quality
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.14 times more return on investment than FlexShares Quality. However, GM is 3.14 times more volatile than FlexShares Quality Dividend. It trades about 0.06 of its potential returns per unit of risk. FlexShares Quality Dividend is currently generating about 0.12 per unit of risk. If you would invest 3,525 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,034 from holding General Motors or generate 57.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. FlexShares Quality Dividend
Performance |
| Timeline |
| General Motors |
| FlexShares Quality |
GM and FlexShares Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and FlexShares Quality
The main advantage of trading using opposite GM and FlexShares Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, FlexShares Quality 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 FlexShares Quality will offset losses from the drop in FlexShares Quality's long position.The idea behind General Motors and FlexShares Quality Dividend 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.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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |