Correlation Between GM and Growth Opportunities
Can any of the company-specific risk be diversified away by investing in both GM and Growth Opportunities 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 Growth Opportunities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Growth Opportunities Fund, you can compare the effects of market volatilities on GM and Growth Opportunities 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 Growth Opportunities. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Growth Opportunities.
Diversification Opportunities for GM and Growth Opportunities
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Growth is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Growth Opportunities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Opportunities 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 Growth Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Opportunities has no effect on the direction of GM i.e., GM and Growth Opportunities go up and down completely randomly.
Pair Corralation between GM and Growth Opportunities
Allowing for the 90-day total investment horizon GM is expected to generate 1.04 times less return on investment than Growth Opportunities. In addition to that, GM is 2.63 times more volatile than Growth Opportunities Fund. It trades about 0.07 of its total potential returns per unit of risk. Growth Opportunities Fund is currently generating about 0.2 per unit of volatility. If you would invest 5,585 in Growth Opportunities Fund on August 28, 2024 and sell it today you would earn a total of 272.00 from holding Growth Opportunities Fund or generate 4.87% 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. Growth Opportunities Fund
Performance |
| Timeline |
| General Motors |
| Growth Opportunities |
GM and Growth Opportunities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Growth Opportunities
The main advantage of trading using opposite GM and Growth Opportunities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Growth Opportunities 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 Growth Opportunities will offset losses from the drop in Growth Opportunities' long position.The idea behind General Motors and Growth Opportunities 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.| Growth Opportunities vs. Large Cap Fund | Growth Opportunities vs. Nicholas Ii Inc | Growth Opportunities vs. Mid Cap Value | Growth Opportunities vs. Tcw Relative Value |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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