Correlation Between GM and Touchstone Arbitrage
Can any of the company-specific risk be diversified away by investing in both GM and Touchstone Arbitrage 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 Touchstone Arbitrage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Touchstone Arbitrage Fund, you can compare the effects of market volatilities on GM and Touchstone Arbitrage 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 Touchstone Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Touchstone Arbitrage.
Diversification Opportunities for GM and Touchstone Arbitrage
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Touchstone is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Touchstone Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Arbitrage 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 Touchstone Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Arbitrage has no effect on the direction of GM i.e., GM and Touchstone Arbitrage go up and down completely randomly.
Pair Corralation between GM and Touchstone Arbitrage
Allowing for the 90-day total investment horizon General Motors is expected to generate 16.44 times more return on investment than Touchstone Arbitrage. However, GM is 16.44 times more volatile than Touchstone Arbitrage Fund. It trades about 0.16 of its potential returns per unit of risk. Touchstone Arbitrage Fund is currently generating about 0.15 per unit of risk. If you would invest 5,096 in General Motors on September 2, 2024 and sell it today you would earn a total of 463.00 from holding General Motors or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Touchstone Arbitrage Fund
Performance |
| Timeline |
| General Motors |
| Touchstone Arbitrage |
GM and Touchstone Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Touchstone Arbitrage
The main advantage of trading using opposite GM and Touchstone Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Touchstone Arbitrage 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 Touchstone Arbitrage will offset losses from the drop in Touchstone Arbitrage's long position.The idea behind General Motors and Touchstone Arbitrage 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.| Touchstone Arbitrage vs. Touchstone Small Cap | Touchstone Arbitrage vs. Touchstone Sands Capital | Touchstone Arbitrage vs. Mid Cap Growth | Touchstone Arbitrage vs. Mid Cap 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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