Correlation Between GM and State Street
Can any of the company-specific risk be diversified away by investing in both GM and State Street 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 State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and State Street Master, you can compare the effects of market volatilities on GM and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and State Street.
Diversification Opportunities for GM and State Street
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and State is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and State Street Master in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Master 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Master has no effect on the direction of GM i.e., GM and State Street go up and down completely randomly.
Pair Corralation between GM and State Street
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.31 times more return on investment than State Street. However, GM is 2.31 times more volatile than State Street Master. It trades about 0.05 of its potential returns per unit of risk. State Street Master is currently generating about 0.03 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,754 from holding General Motors or generate 46.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 98.21% |
| Values | Daily Returns |
General Motors vs. State Street Master
Performance |
| Timeline |
| General Motors |
| State Street Master |
GM and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and State Street
The main advantage of trading using opposite GM and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.The idea behind General Motors and State Street Master 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.| State Street vs. T Rowe Price | State Street vs. Jp Morgan Smartretirement | State Street vs. Virtus Dfa 2040 | State Street vs. Qs Moderate Growth |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |