Correlation Between GM and STRATSSM Certificates

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

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

Diversification Opportunities for GM and STRATSSM Certificates

0.05

Correlation Coefficient

GM  STRATSSM Certificates

Significant diversification

The 3 months correlation between GM and STRATSSM is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and STRATSSM Certificates series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATSSM Certificates 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 STRATSSM Certificates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATSSM Certificates has no effect on the direction of GM i.e., GM and STRATSSM Certificates go up and down completely randomly.

Pair Corralation between GM and STRATSSM Certificates

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the STRATSSM Certificates. In addition to that, GM is 5.59 times more volatile than STRATSSM Certificates series. It trades about -0.16 of its total potential returns per unit of risk. STRATSSM Certificates series is currently generating about 0.1 per unit of volatility. If you would invest  2,279  in STRATSSM Certificates series on September 19, 2024 and sell it today you would earn a total of  21.00  from holding STRATSSM Certificates series or generate 0.92% return on investment over 90 days.

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

General Motors  vs.  STRATSSM Certificates series

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.

STRATSSM Certificates

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STRATSSM Certificates series are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, STRATSSM Certificates is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and STRATSSM Certificates

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

The idea behind General Motors and STRATSSM Certificates series 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.