Correlation Between GM and Sierra Core
Can any of the company-specific risk be diversified away by investing in both GM and Sierra Core 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 Sierra Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sierra E Retirement, you can compare the effects of market volatilities on GM and Sierra Core 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 Sierra Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sierra Core.
Diversification Opportunities for GM and Sierra Core
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Sierra is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sierra E Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra E Retirement 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 Sierra Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra E Retirement has no effect on the direction of GM i.e., GM and Sierra Core go up and down completely randomly.
Pair Corralation between GM and Sierra Core
Allowing for the 90-day total investment horizon General Motors is expected to generate 9.45 times more return on investment than Sierra Core. However, GM is 9.45 times more volatile than Sierra E Retirement. It trades about 0.17 of its potential returns per unit of risk. Sierra E Retirement is currently generating about 0.39 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Sierra E Retirement
Performance |
| Timeline |
| General Motors |
| Sierra E Retirement |
GM and Sierra Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sierra Core
The main advantage of trading using opposite GM and Sierra Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Sierra Core 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 Sierra Core will offset losses from the drop in Sierra Core's long position.The idea behind General Motors and Sierra E Retirement 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.| Sierra Core vs. Sierra Tactical Risk | Sierra Core vs. Sierra Tactical Risk | Sierra Core vs. Sierra Strategic Income | Sierra Core vs. Sierra Tactical Bond |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |