Correlation Between GM and ProShares Trust

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

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

Diversification Opportunities for GM and ProShares Trust

-0.13

Correlation Coefficient

GM  ProShares Trust

Good diversification

The 3 months correlation between GM and ProShares is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust 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 ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of GM i.e., GM and ProShares Trust go up and down completely randomly.

Pair Corralation between GM and ProShares Trust

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the ProShares Trust. In addition to that, GM is 2.49 times more volatile than ProShares Trust . It trades about -0.11 of its total potential returns per unit of risk. ProShares Trust is currently generating about -0.17 per unit of volatility. If you would invest  53,700  in ProShares Trust on September 17, 2024 and sell it today you would lose (1,700) from holding ProShares Trust or give up 3.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

General Motors  vs.  ProShares Trust

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) 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.

ProShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, ProShares Trust 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 ProShares Trust

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

The idea behind General Motors and ProShares Trust 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.