Correlation Between GM and Growth Strategy
Can any of the company-specific risk be diversified away by investing in both GM and Growth Strategy 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 Growth Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Growth Strategy Fund, you can compare the effects of market volatilities on GM and Growth Strategy 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 Growth Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Growth Strategy.
Diversification Opportunities for GM and Growth Strategy
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Growth is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Growth Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Strategy 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 Growth Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Strategy has no effect on the direction of GM i.e., GM and Growth Strategy go up and down completely randomly.
Pair Corralation between GM and Growth Strategy
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.39 times more return on investment than Growth Strategy. However, GM is 3.39 times more volatile than Growth Strategy Fund. It trades about 0.09 of its potential returns per unit of risk. Growth Strategy Fund is currently generating about 0.1 per unit of risk. If you would invest 4,044 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,515 from holding General Motors or generate 37.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
General Motors vs. Growth Strategy Fund
Performance |
| Timeline |
| General Motors |
| Growth Strategy |
GM and Growth Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Growth Strategy
The main advantage of trading using opposite GM and Growth Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Growth Strategy 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 Growth Strategy will offset losses from the drop in Growth Strategy's long position.The idea behind General Motors and Growth Strategy 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.| Growth Strategy vs. Enhanced Large Pany | Growth Strategy vs. Touchstone Large Cap | Growth Strategy vs. Strategic Allocation Aggressive | Growth Strategy vs. Alternative Asset Allocation |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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