Correlation Between GM and Target Retirement
Can any of the company-specific risk be diversified away by investing in both GM and Target Retirement 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 Target Retirement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Target Retirement 2040, you can compare the effects of market volatilities on GM and Target Retirement 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 Target Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Target Retirement.
Diversification Opportunities for GM and Target Retirement
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Target is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Target Retirement 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Retirement 2040 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 Target Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Retirement 2040 has no effect on the direction of GM i.e., GM and Target Retirement go up and down completely randomly.
Pair Corralation between GM and Target Retirement
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.36 times more return on investment than Target Retirement. However, GM is 3.36 times more volatile than Target Retirement 2040. It trades about 0.07 of its potential returns per unit of risk. Target Retirement 2040 is currently generating about 0.1 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
General Motors vs. Target Retirement 2040
Performance |
| Timeline |
| General Motors |
| Target Retirement 2040 |
GM and Target Retirement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Target Retirement
The main advantage of trading using opposite GM and Target Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Target Retirement 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 Target Retirement will offset losses from the drop in Target Retirement's long position.The idea behind General Motors and Target Retirement 2040 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.| Target Retirement vs. Ms Global Fixed | Target Retirement vs. Multisector Bond Sma | Target Retirement vs. Calamos Dynamic Convertible | Target Retirement vs. Ab Bond Inflation |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |