Correlation Between GM and Global Strategy
Can any of the company-specific risk be diversified away by investing in both GM and Global Strategy 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 Global Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Global Strategy Fund, you can compare the effects of market volatilities on GM and Global Strategy 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 Global Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Global Strategy.
Diversification Opportunities for GM and Global Strategy
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Global is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Global Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Strategy 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 Global Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Strategy has no effect on the direction of GM i.e., GM and Global Strategy go up and down completely randomly.
Pair Corralation between GM and Global Strategy
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Global Strategy. In addition to that, GM is 3.9 times more volatile than Global Strategy Fund. It trades about -0.09 of its total potential returns per unit of risk. Global Strategy Fund is currently generating about 0.09 per unit of volatility. If you would invest 1,042 in Global Strategy Fund on November 29, 2024 and sell it today you would earn a total of 8.00 from holding Global Strategy Fund or generate 0.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Global Strategy Fund
Performance |
| Timeline |
| General Motors |
| Global Strategy |
GM and Global Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Global Strategy
The main advantage of trading using opposite GM and Global Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Global Strategy 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 Global Strategy will offset losses from the drop in Global Strategy's long position.The idea behind General Motors and Global Strategy 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.| Global Strategy vs. Aqr Managed Futures | Global Strategy vs. Tiaa Cref Inflation Linked Bond | Global Strategy vs. Short Duration Inflation | Global Strategy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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