Correlation Between GM and Capital Income
Can any of the company-specific risk be diversified away by investing in both GM and Capital Income 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 Capital Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Capital Income Builder, you can compare the effects of market volatilities on GM and Capital Income 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 Capital Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Capital Income.
Diversification Opportunities for GM and Capital Income
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Capital is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder 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 Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of GM i.e., GM and Capital Income go up and down completely randomly.
Pair Corralation between GM and Capital Income
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Capital Income. In addition to that, GM is 4.66 times more volatile than Capital Income Builder. It trades about -0.03 of its total potential returns per unit of risk. Capital Income Builder is currently generating about 0.14 per unit of volatility. If you would invest 6,919 in Capital Income Builder on December 27, 2024 and sell it today you would earn a total of 328.00 from holding Capital Income Builder or generate 4.74% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
General Motors vs. Capital Income Builder
Performance |
Timeline |
General Motors |
Capital Income Builder |
GM and Capital Income Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Capital Income
The main advantage of trading using opposite GM and Capital Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Capital Income 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 Capital Income will offset losses from the drop in Capital Income's long position.The idea behind General Motors and Capital Income Builder 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.Capital Income vs. Angel Oak Financial | Capital Income vs. Fidelity Advisor Financial | Capital Income vs. Gabelli Global Financial | Capital Income vs. Mesirow Financial Small |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |