Correlation Between GM and Sa Us
Can any of the company-specific risk be diversified away by investing in both GM and Sa Us 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 Sa Us into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sa Mkt Fd, you can compare the effects of market volatilities on GM and Sa Us 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 Sa Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sa Us.
Diversification Opportunities for GM and Sa Us
Poor diversification
The 3 months correlation between GM and SAMKX is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sa Mkt Fd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sa Mkt Fd 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 Sa Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sa Mkt Fd has no effect on the direction of GM i.e., GM and Sa Us go up and down completely randomly.
Pair Corralation between GM and Sa Us
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.53 times more return on investment than Sa Us. However, GM is 3.53 times more volatile than Sa Mkt Fd. It trades about 0.1 of its potential returns per unit of risk. Sa Mkt Fd is currently generating about 0.2 per unit of risk. If you would invest 4,829 in General Motors on September 2, 2024 and sell it today you would earn a total of 730.00 from holding General Motors or generate 15.12% 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. Sa Mkt Fd
Performance |
| Timeline |
| General Motors |
| Sa Mkt Fd |
GM and Sa Us Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sa Us
The main advantage of trading using opposite GM and Sa Us positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sa Us 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 Sa Us will offset losses from the drop in Sa Us' long position.The idea behind General Motors and Sa Mkt Fd 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.| Sa Us vs. Sa Value | Sa Us vs. Sa Emerging Markets | Sa Us vs. Sa International Small | Sa Us vs. Sa International Value |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |