Correlation Between GM and Qs Growth
Can any of the company-specific risk be diversified away by investing in both GM and Qs Growth 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 Qs Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Qs Growth Fund, you can compare the effects of market volatilities on GM and Qs Growth 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 Qs Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Qs Growth.
Diversification Opportunities for GM and Qs Growth
Poor diversification
The 3 months correlation between GM and SCHCX is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Qs Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qs Growth 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 Qs Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qs Growth Fund has no effect on the direction of GM i.e., GM and Qs Growth go up and down completely randomly.
Pair Corralation between GM and Qs Growth
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.92 times more return on investment than Qs Growth. However, GM is 2.92 times more volatile than Qs Growth Fund. It trades about 0.31 of its potential returns per unit of risk. Qs Growth Fund is currently generating about 0.15 per unit of risk. If you would invest 5,273 in General Motors on August 28, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% 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. Qs Growth Fund
Performance |
| Timeline |
| General Motors |
| Qs Growth Fund |
GM and Qs Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Qs Growth
The main advantage of trading using opposite GM and Qs Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Qs Growth 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 Qs Growth will offset losses from the drop in Qs Growth's long position.The idea behind General Motors and Qs Growth Fund 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.| Qs Growth vs. Clearbridge Aggressive Growth | Qs Growth vs. Clearbridge Small Cap | Qs Growth vs. Qs International Equity | Qs Growth vs. Clearbridge Appreciation Fund |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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