Correlation Between GM and Tax-exempt High
Can any of the company-specific risk be diversified away by investing in both GM and Tax-exempt High 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 Tax-exempt High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Tax Exempt High Yield, you can compare the effects of market volatilities on GM and Tax-exempt High 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 Tax-exempt High. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Tax-exempt High.
Diversification Opportunities for GM and Tax-exempt High
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Tax-exempt is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tax Exempt High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt High 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 Tax-exempt High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt High has no effect on the direction of GM i.e., GM and Tax-exempt High go up and down completely randomly.
Pair Corralation between GM and Tax-exempt High
Allowing for the 90-day total investment horizon General Motors is expected to generate 7.91 times more return on investment than Tax-exempt High. However, GM is 7.91 times more volatile than Tax Exempt High Yield. It trades about 0.07 of its potential returns per unit of risk. Tax Exempt High Yield is currently generating about 0.19 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Tax Exempt High Yield
Performance |
| Timeline |
| General Motors |
| Tax Exempt High |
GM and Tax-exempt High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Tax-exempt High
The main advantage of trading using opposite GM and Tax-exempt High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Tax-exempt High 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 Tax-exempt High will offset losses from the drop in Tax-exempt High's long position.The idea behind General Motors and Tax Exempt High Yield 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.| Tax-exempt High vs. Matson Money Fixed | Tax-exempt High vs. T Rowe Price | Tax-exempt High vs. Usaa Mutual Funds | Tax-exempt High vs. Legg Mason Partners |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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