Correlation Between GM and Payden Floating

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

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

Diversification Opportunities for GM and Payden Floating

0.81

Correlation Coefficient

GM  Payden Floating

Very poor diversification

The 3 months correlation between GM and Payden is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Payden Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Floating Rate 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 Payden Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Floating Rate has no effect on the direction of GM i.e., GM and Payden Floating go up and down completely randomly.

Pair Corralation between GM and Payden Floating

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Payden Floating. In addition to that, GM is 15.71 times more volatile than Payden Floating Rate. It trades about -0.21 of its total potential returns per unit of risk. Payden Floating Rate is currently generating about -0.07 per unit of volatility. If you would invest  982.00  in Payden Floating Rate on September 25, 2024 and sell it today you would lose (2.00) from holding Payden Floating Rate or give up 0.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

General Motors  vs.  Payden Floating Rate

General Motors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 9 (%) 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.

Payden Floating Rate

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Floating Rate are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Payden Floating 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 Payden Floating

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

The idea behind General Motors and Payden Floating Rate 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.