Correlation Between GM and RiverFront Dynamic
Can any of the company-specific risk be diversified away by investing in both GM and RiverFront Dynamic 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 RiverFront Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and RiverFront Dynamic Dividend, you can compare the effects of market volatilities on GM and RiverFront Dynamic 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 RiverFront Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and RiverFront Dynamic.
Diversification Opportunities for GM and RiverFront Dynamic
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and RiverFront is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and RiverFront Dynamic Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverFront Dynamic 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 RiverFront Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverFront Dynamic has no effect on the direction of GM i.e., GM and RiverFront Dynamic go up and down completely randomly.
Pair Corralation between GM and RiverFront Dynamic
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.45 times more return on investment than RiverFront Dynamic. However, GM is 2.45 times more volatile than RiverFront Dynamic Dividend. It trades about 0.1 of its potential returns per unit of risk. RiverFront Dynamic Dividend is currently generating about 0.12 per unit of risk. If you would invest 3,640 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,919 from holding General Motors or generate 52.72% 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. RiverFront Dynamic Dividend
Performance |
| Timeline |
| General Motors |
| RiverFront Dynamic |
GM and RiverFront Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and RiverFront Dynamic
The main advantage of trading using opposite GM and RiverFront Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, RiverFront Dynamic 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 RiverFront Dynamic will offset losses from the drop in RiverFront Dynamic's long position.The idea behind General Motors and RiverFront Dynamic 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.| RiverFront Dynamic vs. RiverFront Dynamic Flex Cap | RiverFront Dynamic vs. RiverFront Dynamic Core | RiverFront Dynamic vs. RiverFront Strategic Income | RiverFront Dynamic vs. First Trust RiverFront |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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