Correlation Between Charles Schwab and GM
Can any of the company-specific risk be diversified away by investing in both Charles Schwab and GM 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 Charles Schwab and GM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charles Schwab Corp and General Motors, you can compare the effects of market volatilities on Charles Schwab and GM 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 Charles Schwab with a short position of GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charles Schwab and GM.
Diversification Opportunities for Charles Schwab and GM
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Charles and GM is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Charles Schwab Corp and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Charles Schwab 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 Charles Schwab Corp are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Charles Schwab i.e., Charles Schwab and GM go up and down completely randomly.
Pair Corralation between Charles Schwab and GM
Given the investment horizon of 90 days Charles Schwab is expected to generate 1.02 times less return on investment than GM. In addition to that, Charles Schwab is 1.0 times more volatile than General Motors. It trades about 0.31 of its total potential returns per unit of risk. General Motors is currently generating about 0.32 per unit of volatility. 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 Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charles Schwab Corp vs. General Motors
Performance |
| Timeline |
| Charles Schwab Corp |
| General Motors |
Charles Schwab and GM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charles Schwab and GM
The main advantage of trading using opposite Charles Schwab and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charles Schwab position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.| Charles Schwab vs. Goldman Sachs Group | Charles Schwab vs. Riot Blockchain | Charles Schwab vs. Jefferies Financial Group | Charles Schwab vs. Marathon Digital Holdings |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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