Correlation Between GM and Federated Clover
Can any of the company-specific risk be diversified away by investing in both GM and Federated Clover 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 Federated Clover into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Federated Clover Small, you can compare the effects of market volatilities on GM and Federated Clover 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 Federated Clover. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Federated Clover.
Diversification Opportunities for GM and Federated Clover
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Federated is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Federated Clover Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Clover Small 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 Federated Clover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Clover Small has no effect on the direction of GM i.e., GM and Federated Clover go up and down completely randomly.
Pair Corralation between GM and Federated Clover
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.77 times more return on investment than Federated Clover. However, GM is 1.77 times more volatile than Federated Clover Small. It trades about 0.17 of its potential returns per unit of risk. Federated Clover Small is currently generating about 0.29 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Federated Clover Small
Performance |
| Timeline |
| General Motors |
| Federated Clover Small |
GM and Federated Clover Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Federated Clover
The main advantage of trading using opposite GM and Federated Clover positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Federated Clover 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 Federated Clover will offset losses from the drop in Federated Clover's long position.The idea behind General Motors and Federated Clover Small 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.| Federated Clover vs. Federated Emerging Market | Federated Clover vs. Federated Mdt All | Federated Clover vs. Federated Mdt Balanced | Federated Clover vs. Federated Global Allocation |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |