Correlation Between GM and Guggenheim Directional
Can any of the company-specific risk be diversified away by investing in both GM and Guggenheim Directional 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 Guggenheim Directional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Guggenheim Directional Allocation, you can compare the effects of market volatilities on GM and Guggenheim Directional 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 Guggenheim Directional. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Guggenheim Directional.
Diversification Opportunities for GM and Guggenheim Directional
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Guggenheim is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Guggenheim Directional Allocat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Directional 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 Guggenheim Directional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Directional has no effect on the direction of GM i.e., GM and Guggenheim Directional go up and down completely randomly.
Pair Corralation between GM and Guggenheim Directional
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.96 times more return on investment than Guggenheim Directional. However, GM is 2.96 times more volatile than Guggenheim Directional Allocation. It trades about 0.08 of its potential returns per unit of risk. Guggenheim Directional Allocation is currently generating about 0.15 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. Guggenheim Directional Allocat
Performance |
| Timeline |
| General Motors |
| Guggenheim Directional |
GM and Guggenheim Directional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Guggenheim Directional
The main advantage of trading using opposite GM and Guggenheim Directional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Guggenheim Directional 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 Guggenheim Directional will offset losses from the drop in Guggenheim Directional's long position.The idea behind General Motors and Guggenheim Directional Allocation 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.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |