Correlation Between GM and Western Asset
Can any of the company-specific risk be diversified away by investing in both GM and Western Asset 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 Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Western Asset Inflation, you can compare the effects of market volatilities on GM and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Western Asset.
Diversification Opportunities for GM and Western Asset
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Western is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Western Asset Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Inflation 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Inflation has no effect on the direction of GM i.e., GM and Western Asset go up and down completely randomly.
Pair Corralation between GM and Western Asset
Allowing for the 90-day total investment horizon General Motors is expected to generate 7.34 times more return on investment than Western Asset. However, GM is 7.34 times more volatile than Western Asset Inflation. It trades about 0.31 of its potential returns per unit of risk. Western Asset Inflation is currently generating about -0.08 per unit of risk. If you would invest 5,273 in General Motors on August 28, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Western Asset Inflation
Performance |
| Timeline |
| General Motors |
| Western Asset Inflation |
GM and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Western Asset
The main advantage of trading using opposite GM and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.The idea behind General Motors and Western Asset Inflation 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.| Western Asset vs. Pgim Conservative Retirement | Western Asset vs. Pro Blend Moderate Term | Western Asset vs. Blackrock Moderate Prepared | Western Asset vs. Fidelity Managed Retirement |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |