Correlation Between GM and Simt Sp
Can any of the company-specific risk be diversified away by investing in both GM and Simt Sp 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 Simt Sp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Simt Sp 500, you can compare the effects of market volatilities on GM and Simt Sp 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 Simt Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Simt Sp.
Diversification Opportunities for GM and Simt Sp
Poor diversification
The 3 months correlation between GM and Simt is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Simt Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Sp 500 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 Simt Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Sp 500 has no effect on the direction of GM i.e., GM and Simt Sp go up and down completely randomly.
Pair Corralation between GM and Simt Sp
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.58 times more return on investment than Simt Sp. However, GM is 2.58 times more volatile than Simt Sp 500. It trades about 0.13 of its potential returns per unit of risk. Simt Sp 500 is currently generating about 0.13 per unit of risk. If you would invest 4,319 in General Motors on August 28, 2024 and sell it today you would earn a total of 1,701 from holding General Motors or generate 39.38% 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. Simt Sp 500
Performance |
| Timeline |
| General Motors |
| Simt Sp 500 |
GM and Simt Sp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Simt Sp
The main advantage of trading using opposite GM and Simt Sp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Simt Sp 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 Simt Sp will offset losses from the drop in Simt Sp's long position.The idea behind General Motors and Simt Sp 500 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.| Simt Sp vs. Simt Sp 500 | Simt Sp vs. Deutsche Sp 500 | Simt Sp vs. Siit Dynamic Asset | Simt Sp vs. Prudential Qma Stock |
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.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |