Correlation Between GM and Calvert Emerging

Can any of the company-specific risk be diversified away by investing in both GM and Calvert Emerging 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 Calvert Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Calvert Emerging Markets, you can compare the effects of market volatilities on GM and Calvert Emerging 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 Calvert Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Calvert Emerging.

Diversification Opportunities for GM and Calvert Emerging

-0.62

Correlation Coefficient

GM  Calvert Emerging

Excellent diversification

The 3 months correlation between GM and Calvert is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Calvert Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Emerging Markets 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 Calvert Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Emerging Markets has no effect on the direction of GM i.e., GM and Calvert Emerging go up and down completely randomly.

Pair Corralation between GM and Calvert Emerging

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.17 times more return on investment than Calvert Emerging. However, GM is 2.17 times more volatile than Calvert Emerging Markets. It trades about 0.05 of its potential returns per unit of risk. Calvert Emerging Markets is currently generating about 0.03 per unit of risk. If you would invest  3,297  in General Motors on September 19, 2024 and sell it today you would earn a total of  1,818  from holding General Motors or generate 55.14% 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.  Calvert Emerging Markets

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Calvert Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Calvert Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Calvert Emerging

The main advantage of trading using opposite GM and Calvert Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Calvert Emerging 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 Calvert Emerging will offset losses from the drop in Calvert Emerging's long position.

The idea behind General Motors and Calvert Emerging Markets 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.