Correlation Between GM and Fidelity MSCI
Can any of the company-specific risk be diversified away by investing in both GM and Fidelity MSCI 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 Fidelity MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fidelity MSCI Real, you can compare the effects of market volatilities on GM and Fidelity MSCI 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 Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fidelity MSCI.
Diversification Opportunities for GM and Fidelity MSCI
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Fidelity is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fidelity MSCI Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Real 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 Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Real has no effect on the direction of GM i.e., GM and Fidelity MSCI go up and down completely randomly.
Pair Corralation between GM and Fidelity MSCI
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Fidelity MSCI. In addition to that, GM is 2.05 times more volatile than Fidelity MSCI Real. It trades about -0.07 of its total potential returns per unit of risk. Fidelity MSCI Real is currently generating about -0.03 per unit of volatility. If you would invest 2,906 in Fidelity MSCI Real on December 1, 2024 and sell it today you would lose (64.00) from holding Fidelity MSCI Real or give up 2.2% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
General Motors vs. Fidelity MSCI Real
Performance |
Timeline |
General Motors |
Fidelity MSCI Real |
GM and Fidelity MSCI Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Fidelity MSCI
The main advantage of trading using opposite GM and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fidelity MSCI 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 Fidelity MSCI will offset losses from the drop in Fidelity MSCI's long position.The idea behind General Motors and Fidelity MSCI Real 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.Fidelity MSCI vs. Fidelity MSCI Utilities | Fidelity MSCI vs. Fidelity MSCI Consumer | Fidelity MSCI vs. Fidelity MSCI Materials | Fidelity MSCI vs. Fidelity MSCI Financials |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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