Correlation Between GM and BetaShares Legg
Can any of the company-specific risk be diversified away by investing in both GM and BetaShares Legg 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 BetaShares Legg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and BetaShares Legg Mason, you can compare the effects of market volatilities on GM and BetaShares Legg 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 BetaShares Legg. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and BetaShares Legg.
Diversification Opportunities for GM and BetaShares Legg
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and BetaShares is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BetaShares Legg Mason in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Legg Mason 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 BetaShares Legg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Legg Mason has no effect on the direction of GM i.e., GM and BetaShares Legg go up and down completely randomly.
Pair Corralation between GM and BetaShares Legg
Allowing for the 90-day total investment horizon GM is expected to generate 35.88 times less return on investment than BetaShares Legg. But when comparing it to its historical volatility, General Motors is 32.43 times less risky than BetaShares Legg. It trades about 0.08 of its potential returns per unit of risk. BetaShares Legg Mason is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 828.00 in BetaShares Legg Mason on September 1, 2024 and sell it today you would earn a total of 7,901 from holding BetaShares Legg Mason or generate 954.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.92% |
| Values | Daily Returns |
General Motors vs. BetaShares Legg Mason
Performance |
| Timeline |
| General Motors |
| BetaShares Legg Mason |
GM and BetaShares Legg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and BetaShares Legg
The main advantage of trading using opposite GM and BetaShares Legg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, BetaShares Legg 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 BetaShares Legg will offset losses from the drop in BetaShares Legg's long position.The idea behind General Motors and BetaShares Legg Mason 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.| BetaShares Legg vs. Champion Iron | BetaShares Legg vs. Australian Dairy Farms | BetaShares Legg vs. Perpetual Credit Income | BetaShares Legg vs. Greentech Metals |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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