Correlation Between GM and Xtrackers Russell
Can any of the company-specific risk be diversified away by investing in both GM and Xtrackers Russell 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 Xtrackers Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Xtrackers Russell 2000, you can compare the effects of market volatilities on GM and Xtrackers Russell 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 Xtrackers Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Xtrackers Russell.
Diversification Opportunities for GM and Xtrackers Russell
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Xtrackers is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Xtrackers Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Russell 2000 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 Xtrackers Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Russell 2000 has no effect on the direction of GM i.e., GM and Xtrackers Russell go up and down completely randomly.
Pair Corralation between GM and Xtrackers Russell
Allowing for the 90-day total investment horizon GM is expected to generate 4.22 times less return on investment than Xtrackers Russell. But when comparing it to its historical volatility, General Motors is 1.22 times less risky than Xtrackers Russell. It trades about 0.06 of its potential returns per unit of risk. Xtrackers Russell 2000 is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 27,165 in Xtrackers Russell 2000 on September 5, 2024 and sell it today you would earn a total of 4,390 from holding Xtrackers Russell 2000 or generate 16.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Xtrackers Russell 2000
Performance |
| Timeline |
| General Motors |
| Xtrackers Russell 2000 |
GM and Xtrackers Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Xtrackers Russell
The main advantage of trading using opposite GM and Xtrackers Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Xtrackers Russell 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 Xtrackers Russell will offset losses from the drop in Xtrackers Russell's long position.The idea behind General Motors and Xtrackers Russell 2000 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.| Xtrackers Russell vs. Xtrackers MSCI USA | Xtrackers Russell vs. Xtrackers USD Corporate | Xtrackers Russell vs. Xtrackers MSCI AC | Xtrackers Russell vs. Xtrackers MSCI World |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |