Correlation Between GM and 1290 Gamco
Can any of the company-specific risk be diversified away by investing in both GM and 1290 Gamco 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 1290 Gamco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and 1290 Gamco Smallmid, you can compare the effects of market volatilities on GM and 1290 Gamco 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 1290 Gamco. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and 1290 Gamco.
Diversification Opportunities for GM and 1290 Gamco
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and 1290 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and 1290 Gamco Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1290 Gamco Smallmid 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 1290 Gamco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1290 Gamco Smallmid has no effect on the direction of GM i.e., GM and 1290 Gamco go up and down completely randomly.
Pair Corralation between GM and 1290 Gamco
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.77 times more return on investment than 1290 Gamco. However, GM is 1.77 times more volatile than 1290 Gamco Smallmid. It trades about 0.05 of its potential returns per unit of risk. 1290 Gamco Smallmid is currently generating about 0.05 per unit of risk. If you would invest 3,807 in General Motors on August 26, 2024 and sell it today you would earn a total of 2,046 from holding General Motors or generate 53.74% 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. 1290 Gamco Smallmid
Performance |
| Timeline |
| General Motors |
| 1290 Gamco Smallmid |
GM and 1290 Gamco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and 1290 Gamco
The main advantage of trading using opposite GM and 1290 Gamco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, 1290 Gamco 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 1290 Gamco will offset losses from the drop in 1290 Gamco's long position.The idea behind General Motors and 1290 Gamco Smallmid 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.| 1290 Gamco vs. Blackrock Financial Institutions | 1290 Gamco vs. Gabelli Global Financial | 1290 Gamco vs. Financials Ultrasector Profund | 1290 Gamco vs. Mesirow Financial Small |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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