Correlation Between GM and Nasdaq-100 Fund
Can any of the company-specific risk be diversified away by investing in both GM and Nasdaq-100 Fund 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 Nasdaq-100 Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Nasdaq 100 Fund Investor, you can compare the effects of market volatilities on GM and Nasdaq-100 Fund 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 Nasdaq-100 Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nasdaq-100 Fund.
Diversification Opportunities for GM and Nasdaq-100 Fund
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Nasdaq-100 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nasdaq 100 Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Fund 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 Nasdaq-100 Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Fund has no effect on the direction of GM i.e., GM and Nasdaq-100 Fund go up and down completely randomly.
Pair Corralation between GM and Nasdaq-100 Fund
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.82 times more return on investment than Nasdaq-100 Fund. However, GM is 1.82 times more volatile than Nasdaq 100 Fund Investor. It trades about 0.07 of its potential returns per unit of risk. Nasdaq 100 Fund Investor is currently generating about 0.09 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
General Motors vs. Nasdaq 100 Fund Investor
Performance |
| Timeline |
| General Motors |
| Nasdaq 100 Fund |
GM and Nasdaq-100 Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Nasdaq-100 Fund
The main advantage of trading using opposite GM and Nasdaq-100 Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nasdaq-100 Fund 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 Nasdaq-100 Fund will offset losses from the drop in Nasdaq-100 Fund's long position.The idea behind General Motors and Nasdaq 100 Fund Investor 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.| Nasdaq-100 Fund vs. Prudential Core Conservative | Nasdaq-100 Fund vs. Jhancock Diversified Macro | Nasdaq-100 Fund vs. Calvert Conservative Allocation | Nasdaq-100 Fund vs. Evaluator Conservative Rms |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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