Correlation Between GM and Tema Electrification
Can any of the company-specific risk be diversified away by investing in both GM and Tema Electrification 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 Tema Electrification into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Tema Electrification ETF, you can compare the effects of market volatilities on GM and Tema Electrification 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 Tema Electrification. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Tema Electrification.
Diversification Opportunities for GM and Tema Electrification
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Tema is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tema Electrification ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tema Electrification ETF 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 Tema Electrification. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tema Electrification ETF has no effect on the direction of GM i.e., GM and Tema Electrification go up and down completely randomly.
Pair Corralation between GM and Tema Electrification
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.04 times more return on investment than Tema Electrification. However, GM is 1.04 times more volatile than Tema Electrification ETF. It trades about -0.09 of its potential returns per unit of risk. Tema Electrification ETF is currently generating about -0.18 per unit of risk. If you would invest 5,341 in General Motors on October 7, 2024 and sell it today you would lose (164.00) from holding General Motors or give up 3.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Tema Electrification ETF
Performance |
| Timeline |
| General Motors |
| Tema Electrification ETF |
GM and Tema Electrification Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Tema Electrification
The main advantage of trading using opposite GM and Tema Electrification positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Tema Electrification 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 Tema Electrification will offset losses from the drop in Tema Electrification's long position.The idea behind General Motors and Tema Electrification ETF 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.| Tema Electrification vs. iShares Dividend and | Tema Electrification vs. Martin Currie Sustainable | Tema Electrification vs. VictoryShares THB Mid | Tema Electrification vs. Mast Global Battery |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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