Correlation Between GM and Dreyfusthe Boston

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

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

Diversification Opportunities for GM and Dreyfusthe Boston

0.67

Correlation Coefficient

GM  Dreyfusthe Boston

Poor diversification

The 3 months correlation between GM and Dreyfusthe is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Dreyfusthe Boston Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfusthe Boston Pany 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 Dreyfusthe Boston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfusthe Boston Pany has no effect on the direction of GM i.e., GM and Dreyfusthe Boston go up and down completely randomly.

Pair Corralation between GM and Dreyfusthe Boston

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.71 times more return on investment than Dreyfusthe Boston. However, GM is 1.71 times more volatile than Dreyfusthe Boston Pany. It trades about 0.05 of its potential returns per unit of risk. Dreyfusthe Boston Pany is currently generating about 0.04 per unit of risk. If you would invest  3,902  in General Motors on September 30, 2024 and sell it today you would earn a total of  1,526  from holding General Motors or generate 39.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Dreyfusthe Boston Pany

General Motors

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Dreyfusthe Boston Pany

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfusthe Boston Pany are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfusthe Boston may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Dreyfusthe Boston

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

The idea behind General Motors and Dreyfusthe Boston Pany 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 Stocks Directory module to find actively traded stocks across global markets.