Correlation Between GM and ProShares
Can any of the company-specific risk be diversified away by investing in both GM and ProShares 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 ProShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and ProShares SP MidCap, you can compare the effects of market volatilities on GM and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and ProShares.
Diversification Opportunities for GM and ProShares
Very weak diversification
The 3 months correlation between GM and ProShares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ProShares SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP MidCap 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP MidCap has no effect on the direction of GM i.e., GM and ProShares go up and down completely randomly.
Pair Corralation between GM and ProShares
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the ProShares. In addition to that, GM is 2.91 times more volatile than ProShares SP MidCap. It trades about -0.06 of its total potential returns per unit of risk. ProShares SP MidCap is currently generating about 0.17 per unit of volatility. If you would invest 8,066 in ProShares SP MidCap on November 4, 2024 and sell it today you would earn a total of 258.00 from holding ProShares SP MidCap or generate 3.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
General Motors vs. ProShares SP MidCap
Performance |
| Timeline |
| General Motors |
| ProShares SP MidCap |
GM and ProShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and ProShares
The main advantage of trading using opposite GM and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, ProShares 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 ProShares will offset losses from the drop in ProShares' long position.The idea behind General Motors and ProShares SP MidCap 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.| ProShares vs. ProShares Russell 2000 | ProShares vs. ProShares MSCI EAFE | ProShares vs. ProShares MSCI Emerging | ProShares vs. ProShares MSCI Europe |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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