Correlation Between GM and Purpose Fund

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

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

Diversification Opportunities for GM and Purpose Fund

-0.27

Correlation Coefficient

GM  Purpose Fund

Very good diversification

The 3 months correlation between GM and Purpose is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Purpose Fund Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purpose Fund Corp 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 Purpose Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purpose Fund Corp has no effect on the direction of GM i.e., GM and Purpose Fund go up and down completely randomly.

Pair Corralation between GM and Purpose Fund

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Purpose Fund. In addition to that, GM is 5.02 times more volatile than Purpose Fund Corp. It trades about -0.31 of its total potential returns per unit of risk. Purpose Fund Corp is currently generating about -0.17 per unit of volatility. If you would invest  2,009  in Purpose Fund Corp on September 25, 2024 and sell it today you would lose (33.00) from holding Purpose Fund Corp or give up 1.64% of portfolio value over 90 days.

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

General Motors  vs.  Purpose Fund Corp

General Motors

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) 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.

Purpose Fund Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Purpose Fund Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Purpose Fund is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Purpose Fund

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

The idea behind General Motors and Purpose Fund Corp 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.