Correlation Between GM and Thornburg Value
Can any of the company-specific risk be diversified away by investing in both GM and Thornburg Value 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 Thornburg Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Thornburg Value Fund, you can compare the effects of market volatilities on GM and Thornburg Value 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 Thornburg Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Thornburg Value.
Diversification Opportunities for GM and Thornburg Value
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Thornburg is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Thornburg Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Value 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 Thornburg Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Value has no effect on the direction of GM i.e., GM and Thornburg Value go up and down completely randomly.
Pair Corralation between GM and Thornburg Value
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.94 times more return on investment than Thornburg Value. However, GM is 1.94 times more volatile than Thornburg Value Fund. It trades about 0.08 of its potential returns per unit of risk. Thornburg Value Fund is currently generating about 0.12 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 | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. Thornburg Value Fund
Performance |
| Timeline |
| General Motors |
| Thornburg Value |
GM and Thornburg Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Thornburg Value
The main advantage of trading using opposite GM and Thornburg Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Thornburg Value 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 Thornburg Value will offset losses from the drop in Thornburg Value's long position.The idea behind General Motors and Thornburg Value 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.| Thornburg Value vs. Thornburg Value Fund | Thornburg Value vs. Thornburg International Value | Thornburg Value vs. Thornburg International Value | Thornburg Value vs. Thornburg International 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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