Correlation Between GM and EA Series
Can any of the company-specific risk be diversified away by investing in both GM and EA Series 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 EA Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and EA Series Trust, you can compare the effects of market volatilities on GM and EA Series 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 EA Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and EA Series.
Diversification Opportunities for GM and EA Series
Poor diversification
The 3 months correlation between GM and STXM is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust 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 EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of GM i.e., GM and EA Series go up and down completely randomly.
Pair Corralation between GM and EA Series
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.48 times more return on investment than EA Series. However, GM is 2.48 times more volatile than EA Series Trust. It trades about 0.13 of its potential returns per unit of risk. EA Series Trust is currently generating about 0.3 per unit of risk. If you would invest 5,154 in General Motors on August 30, 2024 and sell it today you would earn a total of 396.00 from holding General Motors or generate 7.68% 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. EA Series Trust
Performance |
| Timeline |
| General Motors |
| EA Series Trust |
GM and EA Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and EA Series
The main advantage of trading using opposite GM and EA Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, EA Series 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 EA Series will offset losses from the drop in EA Series' long position.The idea behind General Motors and EA Series Trust 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.| EA Series vs. Vanguard Mid Cap Index | EA Series vs. Vanguard Extended Market | EA Series vs. iShares Core SP | EA Series vs. iShares Russell Mid Cap |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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