Correlation Between GM and Simplify Exchange

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

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

Diversification Opportunities for GM and Simplify Exchange

0.77

Correlation Coefficient

GM  Simplify Exchange

Poor diversification

The 3 months correlation between GM and Simplify is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Simplify Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Exchange Traded 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 Simplify Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Exchange Traded has no effect on the direction of GM i.e., GM and Simplify Exchange go up and down completely randomly.

Pair Corralation between GM and Simplify Exchange

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Simplify Exchange. In addition to that, GM is 11.56 times more volatile than Simplify Exchange Traded. It trades about -0.16 of its total potential returns per unit of risk. Simplify Exchange Traded is currently generating about 0.22 per unit of volatility. If you would invest  2,342  in Simplify Exchange Traded on September 14, 2024 and sell it today you would earn a total of  24.00  from holding Simplify Exchange Traded or generate 1.02% 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.  Simplify Exchange Traded

General Motors

Risk-Adjusted Performance

6 of 100

OK

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 displayed solid returns over the last few months and may actually be approaching a breakup point.

Simplify Exchange Traded

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Exchange Traded are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Simplify Exchange is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with GM and Simplify Exchange

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

The idea behind General Motors and Simplify Exchange Traded 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.