Correlation Between GM and Wasatch World
Can any of the company-specific risk be diversified away by investing in both GM and Wasatch World 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 Wasatch World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Wasatch World Innovators, you can compare the effects of market volatilities on GM and Wasatch World 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 Wasatch World. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Wasatch World.
Diversification Opportunities for GM and Wasatch World
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Wasatch is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Wasatch World Innovators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch World Innovators 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 Wasatch World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch World Innovators has no effect on the direction of GM i.e., GM and Wasatch World go up and down completely randomly.
Pair Corralation between GM and Wasatch World
Allowing for the 90-day total investment horizon General Motors is expected to generate 5.14 times more return on investment than Wasatch World. However, GM is 5.14 times more volatile than Wasatch World Innovators. It trades about 0.14 of its potential returns per unit of risk. Wasatch World Innovators is currently generating about 0.25 per unit of risk. If you would invest 5,180 in General Motors on September 3, 2024 and sell it today you would earn a total of 379.00 from holding General Motors or generate 7.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Wasatch World Innovators
Performance |
| Timeline |
| General Motors |
| Wasatch World Innovators |
GM and Wasatch World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Wasatch World
The main advantage of trading using opposite GM and Wasatch World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Wasatch World 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 Wasatch World will offset losses from the drop in Wasatch World's long position.The idea behind General Motors and Wasatch World Innovators 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.| Wasatch World vs. Wasatch World Innovators | Wasatch World vs. Consumer Services Ultrasector | Wasatch World vs. Select Fund R | Wasatch World vs. Select Fund C |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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