Correlation Between GM and Rmb Smid
Can any of the company-specific risk be diversified away by investing in both GM and Rmb Smid 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 Rmb Smid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Rmb Smid Cap, you can compare the effects of market volatilities on GM and Rmb Smid 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 Rmb Smid. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Rmb Smid.
Diversification Opportunities for GM and Rmb Smid
Poor diversification
The 3 months correlation between GM and Rmb is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Rmb Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rmb Smid Cap 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 Rmb Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rmb Smid Cap has no effect on the direction of GM i.e., GM and Rmb Smid go up and down completely randomly.
Pair Corralation between GM and Rmb Smid
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.14 times more return on investment than Rmb Smid. However, GM is 2.14 times more volatile than Rmb Smid Cap. It trades about 0.08 of its potential returns per unit of risk. Rmb Smid Cap is currently generating about 0.12 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. Rmb Smid Cap
Performance |
| Timeline |
| General Motors |
| Rmb Smid Cap |
GM and Rmb Smid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Rmb Smid
The main advantage of trading using opposite GM and Rmb Smid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Rmb Smid 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 Rmb Smid will offset losses from the drop in Rmb Smid's long position.The idea behind General Motors and Rmb Smid Cap 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.| Rmb Smid vs. Rmb Small Cap | Rmb Smid vs. Rmb Fund I | Rmb Smid vs. Rmb Fund C | Rmb Smid vs. Rmb Mendon Financial |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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